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FSA censors two traders from Dresdner

The FSA (Financial Services Authority) has today censored two traders from Dresdner bank in relation to a Barclays bank bond issue back in 2007. It would appear that the traders in question had initially caught wind of the bond issue, which was to be on more favourable terms than existing Barclays bonds. As a consequence they are alleged to have approached various investors to "sound them out" about the new issue and gauge market reaction.

Quite why the FSA chose this particular issue to come down hard on "market abuse" is something of a mystery when you consider that the "sounding out" of investors has been going on for years. Does the FSA really think a company such as Lloyds bank, which is rumoured to be considering a £15 billion rights issue, does not approach major institutional investors beforehand to gauge their opinion?

The truth is that many investors are sounded out with regards to potential fundraisings in order to gauge interest and the potential price of new shares or bonds. While the action taken against the two Dresdner traders was something of a slap on the wrist, the FSA has promised to come down harder on those who flout the rules in the future. Is this move taking away a further competitive edge which London has on so many other markets around the world?

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