FSA asks UK to speed up new market abuse sanctions

LONDON, May 6 (Reuters) - Britain's financial watchdog is disappointed at the government's slowness in granting it new powers to combat market abuse, including the ability to grant immunity from prosecution in exchange for evidence, it said.

Chancellor of the Exchequer (Finance Minister) Alistair Darling said in March that Britain planned to give the Financial Services Authority (FSA) new powers to combat market abuse, including a U.S.-style whistleblower system and plea-bargaining, to help track down "smoking guns".

Speaking in a wide-ranging parliamentary committee hearing on Tuesday, however, FSA Chief Executive Hector Sants said the regulator was disappointed there was still no timetable as to when the powers would be granted.

"We are in the hands of the government to give us the legal powers," FSA Chairman Callum McCarthy told the Treasury Select Committee during the hearing. "That has not yet happened."

The FSA, long under fire for not cracking down on insider dealing and market abuse, published data last week indicating irregular trades before mergers and acquisitions in 2007 were almost unchanged from the previous year, but said it would boost its investigation team and use jail sentences and tougher fines to create a "credible deterrent".

Speaking before the influential Treasury Select Committee as part of a cross-party inquiry into financial stability and transparency, Sants and McCarthy were also again questioned on the near-collapse of mortgage bank Northern Rock.

The Northern Rock debacle shook the credibility of the FSA and of Britain's entire regulatory system, particularly the "tripartite" format which shares financial regulation between the FSA, the Bank of England (BoE) and the Treasury.

BoE Governor Mervyn King last week attacked the arrangement that sees a BoE official sitting on the FSA board and vice versa, saying the positions were irrelevant and "created enormous confusion".

The FSA said on Tuesday it favoured giving the Bank formal responsibility for financial stability and welcomed clarity that would stop it becoming a confusing "parallel supervisor".

"A clearer mandate would help encourage the bank to be more proactive in that area, and we would welcome that," Sants said.

A further consultation paper on the shape of British financial regulation after the Northern Rock crisis is due this summer, with legislation expected later in the year. (Reporting by Clara Ferreira-Marques; Editing by David Hulmes)