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The Financial Services Authority (FSA) has today fined Simon Eagle £2.8m and banned him from working in financial services. Eagle was responsible for a complex and prolonged abusive scheme that deliberately set out to ramp up the share price of Fundamental-E Investments (FEI) for his own benefit.
The Financial Services Authority (FSA) has today fined Simon Eagle £2.8m and banned him from working in financial services. Eagle was responsible for a complex and prolonged abusive scheme that deliberately set out to ramp up the share price of Fundamental-E Investments (FEI) for his own benefit. The fine consists of a disgorgement of £1.3m profit and a penalty of £1.5m and is the FSA’s largest ever fine on an individual.
In 2003 Eagle agreed to buy 85% of FEI, an Alternative Investment Market (AIM) listed stock, from its two principal shareholders. He intended to keep 10% of the stock and needed to find buyers for the remaining 75%. Eagle purchased SP Bell Limited (SP Bell) an agency-only stockbroker and became its controller and chief executive. He also introduced a number of new clients to the firm, despite knowing that some of the clients had insufficient funds to trade.
Eagle’s intention was to use SP Bell to sell FEI shares to its clients, generating demand for the stock and pushing its price up. Eagle instructed SP Bell staff to sell FEI shares to clients, many of whom were unaware that the shares were being bought and sold on their behalf. In order to defer clients having to pay for the shares, many of the trades were rolled over from client to client without being settled. These rollover trades carried out by the market maker, Winterflood, breached London Stock Exchange (LSE) rules.
The trades carried out by SP Bell and the increases in the bid/offer spread for FEI shares by Winterflood, at the request of Eagle, led to an artificial increase in the share price and gave a misleading impression of demand for the shares. The share price rose from 2.5p in May 2003 to 11.75p in July 2004. The scheme enabled Eagle to secure control of FEI and acquire 10% of its stock. He was also paid a commission of £1.2m by FEI’s original shareholders.
Margaret Cole, director of enforcement, said:
"Eagle deliberately set out to create a scheme to artificially inflate the price of FEI shares. He involved others in his activities and exposed individual clients to serious financial debts of over £9m. His conduct breached the LSE’s rules, caused significant disruption to share dealing in FEI shares, and damaged confidence in the AIM market.
“This scheme was rotten throughout and at the core was Simon Eagle. He showed a breathtaking disregard for his clients, for his duty as an approved person and chief executive and for the effect of his scheme on markets. He has played procedural games in an attempt to avoid being held accountable for his actions and this tough action shows that we are determined to keep dishonest cheats, like Simon Eagle, out of financial services."
Trading in FEI shares was suspended in July 2004 leaving over £9m of unsettled trades which neither SP Bell nor its clients could meet. SP Bell ceased trading and went into administration.
Eagle had referred his case to the Financial Services and Markets Tribunal, but withdrew his reference on 30 April 2010.
