Regulation  

FCA bans former investment consultant for market abuse

The Financial Conduct Authority has banned a former investment consultant for deliberately encouraging another person to purchase shares while he had inside information in the firm.

Rahul Shah, a former investment consultant, deliberately encouraged another person to purchase shares in Vyke Communications plc whilst Mr Shah was himself in possession of inside information regarding the firm.

In addition to Mr Shah’s full prohibition, the FCA would have imposed a fine of £125,000 but for Mr Shah’s financial position.

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Mr Shah had contractual agreements which meant he stood to receive 40 per cent of any profit made from the purchase of the Vyke shares. Mr Shah had been given inside information about Vyke on two separate occasions, on 16 and 30 June 2010.

The inside information concerned a joint venture agreement to be entered into by Vyke. Following receipt of the inside information on 30 June, Mr Shah encouraged another person to buy Vyke shares by telling that person that a broker acting for Vyke recommended the purchase.

The FCA’s view is that Mr Shah’s behaviour was “deliberate” and that he has, therefore, “demonstrated a serious lack of honesty and integrity”.

As a result of this, the FCA has decided that Mr Shah should be prohibited from performing any function in relation to any regulated activity carried on by any authorised or exempt person or exempt professional firm on the grounds that he is not a fit and proper person.

Tracey McDermott, FCA director of enforcement and financial crime said: “Confidence in markets depends on investors knowing they are operating on a level playing field. Inside information is a valuable commodity and must be treated as such.

“Exploiting that information whether to make investment decisions or to encourage others to do so gives an unfair advantage. Where this happens we will take firm action.”

Mr Shah had referred his case to the Upper Tribunal, but withdrew his reference on 5 November 2013.