AAE traders accepted improper instructions whose apparent purpose was to push the closing market price of certain shares to a higher level than would otherwise have been the case. This happened on three separate occasions between April and October 1998 in respect of four stocks and involved several different traders. They were acting on the instructions of a US sales trader at ABN AMRO Inc acting on behalf of the same US client. The stocks involved were: Carlton Communications plc, British Biotech plc, Volkswagen AG and Metro AG.
Trading in stocks simply to move the market price is a serious abuse: it distorts market forces and undermines investors' confidence in the integrity of the prices quoted on exchanges.
Carol Sergeant, Managing Director of the Financial Services Authority, said:
"These were not isolated events. The repeated nature of the breaches demonstrates the absence of a robust compliance environment on the firm's trading floor.
The compliance environment within a financial institution is a fundamental protection against the spread of poor standards of conduct.
We view with particular seriousness misconduct that occurs in the context of a firm's inadequate investment in compliance procedures, policies and training. Investors need to be confident that they are dealing in clean and orderly markets."
The FSA has found that AAE did not adequately resource its compliance function and failed to have appropriate polices, procedures and training for staff. These shortcomings in the compliance function were highlighted to senior management by the compliance officer but no adequate remedial steps were taken. The absence of a strong and effective compliance environment, together with AAE's focus on the promotion of business with US clients and the assertive behaviour of the US trader meant that the AAE traders sought to manage difficult situations without adequate regard to regulatory compliance.
AAE has acknowledged that there were serious internal compliance failings within the firm. In setting the level of penalty in this case, the FSA has taken into account the fact that in the period since these failings occurred, AAE has undertaken major steps to improve its compliance function, training programmes and compliance policies and procedures.
Mr Ackers, the then joint head of desk at AAE, has been disciplined for his involvement in one of the three instances of market misconduct. Another individual, at the time a Director of UK Equities, was suspended by the Securities and Futures Authority for 3 years ending on 23 December 2001.
