The Financial Services and Markets Tribunal (the Tribunal) has found that two friends engaged in market abuse. Having considered the evidence as a whole and all the circumstances, the Tribunal concluded that, on three occasions, Mr Chhabra, an analyst, disclosed relevant information regarding forthcoming company announcements to his friend, Mr Patel, who placed spread bets on the share price of those companies in reliance on the information. The total benefit gained by Mr Patel was £85,541.

The Tribunal took into account the fact that the two were close friends and telephoned each other frequently, that they were both approved persons of good character and so less likely to behave badly, that Mr Chhabra had no financial motive and that Mr Patel was a frequent spread better. However, although Mr Patel made a loss on the first occasion, the second and third bets led to Mr Patel making his largest profits and also involved unscheduled announcements which were contrary to Mr Chhabra’s previously published forecasts (leading the Tribunal to express surprise that Mr Chhabra had time to call Mr Patel in the midst of such developments).

Overall, the three similar sequences of events, which involved Mr Chhabra acquiring information, Mr Chhabra telephoning Mr Patel and then significant bets being placed by Mr Patel consistent with the information received by Mr Chhabra, led the Tribunal to conclude that market abuse had been committed.

The Tribunal’s decision deals only with the issue of liability and not with the proposed penalties and prohibitions and so a separate hearing will be held to determine the appropriate sanctions.

View Chhabra & Patel (072), 24, December 2009