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£7.5 Million Market Abuse Fines Imposed in Landmark Case

In an unprecedented decision, the High Court has imposed fines totalling more than £7.5 million on three financial traders who were involved in wholesale abuse of the stock market and the companies which stood behind them.

The traders, who operated offshore, were involved in a form of market manipulation known as ‘layering’, or ‘spoofing’, in which orders to trade were issued which gave a false or misleading impression as to the supply of, or demand for, or as to the price of, securities listed on the London Stock Exchange.

In the first case of its kind, the Financial Conduct Authority asked the High Court to impose financial penalties on the traders under the Financial Services and Markets Act 2000. Proceedings were also launched against the offshore corporate vehicle through which the traders operated (company A) and a company which provided them with the capital and infrastructure they needed (company B).

There was overwhelming evidence that the traders had engaged in illegal market manipulation and the Court found that the experienced trio were fully aware that what they were doing was wholly improper. Company A, as their creature, was in the same position as them. Although company B had not directed the market abuse, it was driven by the desire for profit and had turned a blind eye.

The Court imposed penalties totalling £1.11 million on the traders. Company A received a £5 million bill and company B was ordered to pay £1.46 million. Those figures were designed to be deterrent and far exceeded profits garnered from the market abuse. The Court also issued an injunction against all four defendants, forbidding them from engaging in further unlawful trading.