The regulator’s investigation, conducted by the enforcement, markets, supervision and intelligence division, found that while the rumours would have had some impact on HBOS’ share price, there was no evidence of wrongdoing.
On March 18 the HBOS share price closed at 480p. Prior to market opening and throughout March 19 rumours circulated that the bank faced funding difficulties.
Some reports claimed that the Governor of the Bank of England had cancelled his travel plans in order to resolve a liquidity problem at HBOS and that the Bank of England was “bailing out” the bank.
Many market commentators speculated that the fall in the HBOS share price was the result of unscrupulous traders who spread false rumours to make unjustified profits, having earlier short sold the shares.
Following the investigation the FSA markets division has launched a review of the systems and controls at firms for dealing with rumours.
It says: “Specifically, we are examining what policies are in place and how firms ensure compliance with them, whether and how rumours are verified, whether traders are permitted to pass on or trade on rumours and how firms ensure staff do not initiate or spread false rumours.
“This exercise is covering a range of investment banks, securities firms and hedge fund managers. We will communicate our findings to the market in the early autumn.”