Market-abusing trader ordered to pay £1m in fines and damages

The FSA, the UK's financial services regulator, also obtained an injunction from the High Court that bans the trader from further market abuses, it said.

Under the Financial Service and Markets Act the FSA can ask the courts for injunctions and court orders forcing market abusers to repay ill-gotten gains. It is the second time the FSA has obtained a permanent injunction against an individual for market abuse, the FSA said.

Barnett Michael Alexander committed market abuse by trading in shares that manipulated the price of other financial products he was also trading, the FSA said in a statement.

The Court fined Alexander £700,000 and ordered him to pay £322,818 to companies that experienced losses as a result of Alexander's practices, the FSA said.

Alexander is banned from performing any function in relation to a regulated activity for at least five years and he has transferred an additional £306,312 from trading accounts in his name to the companies who experienced losses through his actions, the FSA said.

“For some time now, the FSA has been making unannounced calls direct to traders to clamp down on market abuse where there is thought to be suspicious trading," Bruno Geiringer, financial services legal expert at Pinsent Masons, the law firm behind OUT-LAW, said.

"This case shows the deep reach of the FSA and the seriousness of the sanctions available in the event that the FSA has suspicions of malpractice," Geiringer said.

The FSA said it had determined Alexander's £700,000 fine after consulting its Decision Procedure and Penalties manual. The manual suggests factors that the FSA may take into account when prescribing penalties for market abuse, such as the experience and knowledge of the trader and whether their actions had been for a legitimate purpose.

Alexander avoided a higher value fine by agreeing to settle with the FSA at an early stage of its investigation and consenting to the court order, the FSA said.

"Were it not for this discount, the FSA would have asked the court to impose a financial penalty of £1,000,000 on Alexander," the FSA statement said.

Operating as a self-employed trader, Alexander dealt in shares and retail derivate products, such as contracts for differences (CFDs) and spread bets from home, it said.

Alexander placed orders to buy and sell shares in order to manipulate the prices of the CFDs and spread bets he owned which were related to the price of the shares, the FSA said.

"Alexander generated £629,130 by trading CFDs and spread bets at the prices he created through his share price manipulation, and frequently used CFD and spread betting accounts in the names of third parties to disguise his behaviour," the FSA statement said.

The FSA was alerted to the market abuses by a firm involved in trading that submitted a Suspicious Transaction Report after conducting an investigation into Alexander's activities.

The FSA said it regarded Alexander's practices as a "serious case" of market abuse because Alexander was an experienced trader and former private client stockbroker, because his behaviour was deliberate and repeated on a regular basis over 16 months, because Alexander sought to conceal his behaviour and because of the huge profits Alexander made as a result of his misconduct.

“The FSA views market manipulation extremely seriously," Tracey McDermott, the FSA’s acting director of enforcement and financial crime, said in the FSA statement.
 
"Alexander’s behaviour was deliberate and repeated over a significant period of time. He sought to conceal his trading and made substantial profits at the expense of the firms which allowed him to trade with them," McDermott said.

“The court action shows the FSA’s determination to use all our powers to prevent market abuse and to pursue those who commit it,” McDermott said.