A former inter-dealer broker has been prohibited in connection with deliberate unauthorised trades. He was permitted to trade on behalf of clients on a matched basis but was not authorised to take proprietary positions on behalf of his firm. He deliberately entered into several unmatched trades creating a short position of almost 7 million HSBC shares without authorisation from his firm.
He also wrote four false deal slips purporting to record purchases in order to mislead the back-office into thinking that the sales were matched. Despite requests over several days from back-office for information to enable them to verify the purchases, he continued to assert that the trades were genuine. By the time the fraud was discovered and the position closed out, the firm had lost almost £2.7 million.
View FSA bans inter-dealer broker, 21 May 2010
View FSA Final Notice - Jonathan Bunn, 21 May 2010
A settlements manager has been prohibited in connection with a fraud which involved theft from his employer and a number of clients, concealment of amounts paid to the firm in error and use of these funds to cover-up fraud. He also sought to conceal his misconduct from his employer.
The firm has already been fined £154,000 for failing to establish effective controls to prevent an employee committing fraud.
View FSA Final Notice - John White, 25 May 2010
The chief executive of a stock-broking company ("Eagle") has been fined £2.8 million and prohibited for market abuse in connection with a share ramping scheme in which he deliberately set out to increase the share price of an AIM stock for his own benefit. The fine consisted of a £1.3 million disgorgement and a £1.5 million penalty.
He agreed to buy 85% of an AIM company’s stock from its two principal shareholders, intending to keep 10% and sell the rest. He purchased the stock-broking company (“SP Bell”) which he used to sell the stock, generating demand and pushing up the price. He also used a market maker (“Winterflood”) to intermediate the sales: the original shareholders sold their shares to Winterflood which sold them on to SP Bell clients.
Eagle introduced new clients to SP Bell, knowing that many of them did not have sufficient funds to finance trading. He then instructed the brokers to sell the shares to these clients, in many cases without their authority. In this way, Eagle received a commission of over £1.2 million from the original shareholders, acquired control of the company and became its executive chairman.
In order to defer payment for the shares purchased by SP Bell clients, Eagle instituted a scheme whereby positions were rolled from client to client (in breach of LSE Rules); any stock for sale was purchased by SP Bell or its clients and delayed rollovers were executed. As a result of the scheme the fact that a significant amount of the shares had not been paid for was concealed and the market was given a false and misleading impression as to the demand for the shares. The scheme also generated commission for SP Bell.
Eagle also deliberately manipulated the company’s share price, undertaking two corporate acquisitions in return for shares and, through Winterflood, achieving a series of increases in the bid/offer quote, aiming to attract media and investor attention and secure an increasing share price.
Eagle was not fit and proper because he intended the effects of his behaviour, namely the creation of a false and misleading impression as to the demand and price or value of the shares and the distortion of the market in those shares.
View Final Notice - Simon Eagle, 18 May 2010.