Regulation  

High Court backs FCA’s demand for £7.5m fine

High Court backs FCA’s demand for £7.5m fine

The High Court today held that the Financial Conduct Authority is entitled to permanent injunctions and penalties totalling £7.5m against Szabolcs Banya, Gyorgy Szabolcs Brad, Tamas Pornye and companies Da Vinci Invest and Mineworld for committing market abuse.

This was in relation to 186 UK-listed shares using a manipulative trading strategy known as ‘layering’, involving entering and trading orders in relation to shares traded on the electronic trading platform of the London Stock Exchange and multi-lateral trading facilities to create a false or misleading impression as to the supply and demand for those shares, enabling them to trade at an artificial price.

The FCA took action to stop the abuse in July 2011, but this is the first time the regulator asked the High Court to impose a permanent injunction restraining market abuse and a penalty.

Four of the five defendants were incorporated or resident abroad in Switzerland, the Seychelles and Hungary.

Georgina Philippou, acting director of enforcement and market oversight, explained that this was a sophisticated form of abuse that took place across multiple trading platforms.

“Today’s judgment shows the FCA’s ability and determination to stamp out abusive market practice wherever it may occur in UK markets,” she added, noting the judge’s statement that “protecting the integrity and proper functioning of those markets is a matter of substantial importance to individuals as well as to national and international economic interests”.

In July and August 2011, the FCA successfully applied for an interim injunction restraining Da Vinci Invest, Da Vinci Invest, Mineworld, Mr Banya and Mr Szabolcs Brad from committing market abuse and freezing the assets of the three companies.

A hearing is to be fixed to determine various consequential issues including the terms of the final injunction and the defendants have the right to apply for permission to appeal.

The FCA has secured a number of other enforcement actions against firms and individuals for layering, including cases against Swift Trade and Michael Coscia.

peter.walker@ft.com