On 10 March 2010, Malcolm Calvert, a former equities market maker at Cazenove, was convicted of insider dealing. Mr Calvert made approximately £104,000 profit from the trades which took place between June 2003 and October 2004. In announcing Mr Calvert’s conviction, the FSA also announced that it had imposed a financial penalty of £56,068 on Bertie Hatcher for market abuse. Mr Hatcher was a friend of Mr Calvert and is credited as being a key witness regarding the dealing scheme in which he participated with Mr Calvert.

The fact that Mr Hatcher agreed to provide assistance in the ongoing investigation into Mr Calvert’s conduct was a key factor in a settlement whereby the FSA agreed not to use its powers to bring a criminal prosecution against him. In addition, Mr Hatcher’s fine was restricted to disgorgement of profits to reflect his cooperation.

It is understood that Mr Calvert is appealing against his conviction.

The facts

The final notice issued to Mr Hatcher explains that he had acted in concert with Mr Calvert in behaviour which amounted to market abuse from April 2003 onwards. Mr Hatcher was a retired bookmaker and insurance broker and had known Mr Calvert for about 20 years. Mr Calvert told Mr Hatcher that he had a good source of share tips but was prevented from dealing due to the fact that he received a pension from Cazenove, which put him in an awkward position.

Mr Hatcher agreed to buy shares on the basis of these tips and gave two-thirds of the profit to Mr Calvert. Mr Hatcher subsequently bought shares in six companies listed on the London Stock Exchange prior to the announcement of a corporate event in each case (in respect of which Cazenove acted as a professional adviser) and sold them following the announcement, at a profit.


  • The fine imposed on Mr Hatcher solely represented the disgorgement of his profits, notwithstanding the fact that the FSA considered that the pair had acted in concert and the conduct of Mr Calvert was serious enough to merit a criminal prosecution. The amount of Mr Hatcher’s financial penalty was set before the introduction of the FSA’s new penalties regime on 6 March 2010. Disgorgement of profit is the first of the five steps for calculating financial penalties under the new regime. Under this regime, the disgorgement figure may be multiplied by a figure between zero and four representing the seriousness of the misconduct (amongst other things). It is not clear how the new regime would apply to similar circumstances in the future and, in particular, whether the financial penalty would be limited to disgorgement of profit.
  • The FSA’s press release signals an intention to undertake more plea-bargaining in the future. It states that; “Hatcher provided valuable evidence to the FSA, not just about his own conduct, but in relation to Calvert. We will continue to enter into agreements of this sort where we believe it is in the public interest and the interests of justice for the FSA to do so.” The promise of leniency may prove a strong incentive to individuals or firms under investigation by the FSA to inform on others. It remains unclear, however, how fines which are limited to disgorgement in market abuse cases can be reconciled with higher fines for conduct such as systems and controls breaches where there is no opportunity to give evidence against another party, particularly in circumstances where the former conduct is arguably more serious.
  • The factors which were taken into account by the FSA in assessing Mr Hatcher’s penalty are summarised in the final notice. No apparent regard was given in Mr Hatcher’s case to the adverse effect on the markets, if any, or whether the breach was deliberate or reckless. This is notwithstanding the fact that, earlier in the notice, the FSA highlights Mr Hatcher’s acquaintance with the stock market and the circumstances known to him in determining that his behaviour was unacceptable. The notice states that the FSA has had regard to the level of culpability on Mr Hatcher’s part but sheds no light on what this was determined to be. Although the FSA recognises that, if the new financial penalties regime is to achieve its aims of greater transparency and consistency, it remains to be seen whether future final notices will provide sufficient details to assess the weight which has been attached to the various factors in order to determine the financial penalty. In particular, in cases such as this, it would be helpful to know what the financial penalty would have been if the individual had not cooperated. As well as providing greater transparency, this may encourage others to come forward to give assistance to the FSA.

For further information and analysis regarding the FSA’s new penalties regime, please refer to following briefing note: New FSA penalty-setting framework