Tribunal directs FSA on Market Abuse Case

The FSA in UK on 7 Sept has reported on a rather interesting decision of the Upper Tribunal (Tax and Chancery Chamber) on a case of market abuse in the commodities market by a trader. The trader in concern is Jason Geddis, who according to the FSA report, was securing a price of Lead contracts at the London Stock Exchange at an artificial and abnormal level. On 21 Nov 2008, Mr. Geddis was rapidly building up a position on a particular Lead Contract and then unwound it quickly at the LSE open outcry session at rapidly increasing prices. FSA noted in its notice that Mr. Geddis was doing so to squeeze a substantial profit for his own firm.

However, the Tribunal determined that the undertaking only constituted a lack of proper care rather than a failure of integrity. It ruled that there was no premeditated plan for the undertaking. As a penalty, Mr. Geddis is given a public censure, which parts way from FSA’s proposal to fine and impose prohibition order.

The Tribunal decision can be found here.

UK FSA Boiler Room Fraud case success

On 14 June 2011 the UK FSA reported that it had secured a criminal conviction for boiler room fraud against David Roger Griffiths Mason, who has been sentenced to two years in prison and disqualified from being a director for six years.

Mason pleaded guilty to 13 counts of carrying on a regulated activity without authorisation; one count of making false or misleading statements, promises or forecasts; and three counts of money laundering. The sentencing Judge, HHJ Rivlin QC said:

"I am satisfied that without your involvement this scheme could never have operated... I do believe the arrangements made by you were sophisticated... You caused distress, worry, frustration and in some cases serious disruption... You acted with blatant and I would say ruthless dishonesty which was thoroughly reprehensible."

A full detail of the case and related matters is available here.

UK Corporate Broker & Father Receive Jail Time for Insider Dealing

by Karl Hindle - London, UK

Matthew Uberoi, a corporate broker intern was sentenced to 1 year in jail for insider trading, while his father received a 2 year sentence.  The two men were found guilty after the FSA brought a prosecution which is only the second insider dealing case to date.

The pair were found guilty in November but received their sentencing last week at Southwark Crown Court but the proceedings have not yet finished.  A further hearing is taking place today to determine the level of confiscation of assets required to strip the pair of their unlawful gains – the judge has already certified that the full benefit of the trades is GBP £288,050.05 rendering a profit of GBP £110,000.

Using emails and an internet forum on share dealing, the pair communicated using a code borrowed from a Chinese takeaway menu. In passing sentence, Judge Testar stated that the two men had behaved “dishonestly and deliberately so” and made special reference in respect of the lack of cooperation with the FSA investigation and the trial proceedings. The father was sought out for particular approbation, as the judge said of him,

“I’m afraid he was very dishonest in front of the jury. Some of the things he said could be described as breathtaking.” 

 Margaret Cole, Director of Enforcement and Financial Crime at the FSA stated,

"The sentences Matthew Uberoi and his father are facing clearly demonstrate that insider dealing is a serious crime with serious consequences.”

This successful prosecution will only encourage the FSA to use the criminal legal system even more, and already there are a string of further prosecutions lined up in the system.  As Cole further stated,

"This is our second successful criminal prosecution and there are more to come. Our recent successes reinforce the FSA’s credibility as a prosecutor.  We are determined to do whatever is necessary to ensure that insider dealing is no longer seen as a way to make a quick profit but as a crime that does not pay."
 

More Cases on the Way

The Court of Appeal rejected an appeal by the first party to be convicted of insider dealing; Christopher McQuoid’s appeal against an 8 month sentence was rejected.  The Court of Appeal reiterated that insider dealing is not a victimless crime and as it undermines public confidence in the financial system, public prosecutions and jail terms are more appropriate than regulatory action.

Judicial statements such as these will only add fuel to the FSA’s drive to prosecute other cases and three more cases will be heard early in 2010.

Malcolm Calvert is due for trial on 15^th February 2010; Neil Rollins on 12 April 2010 and Messrs. King, Rimmington and McFall on 19^th April 2010.