UK's Financial Services Authority: Former Directors Sentenced For Criminal Market Abuse

Carl Rigby, 43, the former Chairman and Chief Executive of software firm AIT, was sentenced today at Southwark Crown Court to 3½ years imprisonment and was disqualified from being a company director for 6 years. Gareth Bailey, 36, the firm's former Financial Director, received a sentence of 2 years imprisonment and was disqualified from being a company director for 4 years.

Both individuals were found guilty in August of one count of recklessly making a statement, promise or forecast which was misleading, false or deceptive. This is the first time the FSA has prosecuted for this offence.

In passing sentence, His Honour, Judge Elwen, said:

"Every member of the public, having savings by direct investment on the stock market or by and through products themselves tied to stock markets, is injured if the integrity of the market is damaged by misleading information of this kind being announced to the market.

"If investors, large and small, come to the view that they cannot trust the information companies announce to the market, they will avoid the market when making investment decisions. The health of the financial services industry which is a major contributor to the UK economy will suffer."

Margaret Cole, Director of Enforcement, at the FSA said:

"This was not a victimless crime. The efficient operation of the markets depends on investors' ability to rely on information released by companies.

"Directors can expect to be held personally responsible for the announcements they make to the market, as these convictions have shown. The sentences further demonstrate that the Courts take a serious view of this type of behaviour. Before issuing a statement, directors must carefully consider their obligations and inform and consult their advisors early in the process."

There will be an asset confiscation hearing on 11 November 2005.

Background

1. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the appropriate degree of protection for consumers; and fighting financial crime.
2. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.
3. This is the first criminal action taken by the FSA under s397 of the Financial Services and Markets Act 2000. This section sets out the criminal offences of making a misleading statement and engaging in a misleading course of conduct for the purpose of inducing another person to exercise or refrain from exercising rights in relation to investments.
4. When the FSA decides whether to bring criminal proceedings or to refer the matter to another prosecuting authority it will apply the basic principles set out in the Code for Crown Prosecutors.
   Under the Code for Crown Prosecutors, the FSA will in each case apply the Full Code Test, whether:
   1. there is sufficient evidence to provide a realistic prospect of conviction against the defendant on each criminal charge ('the evidential test'); and
   2. having regard to the seriousness of the offence and all the circumstances, criminal prosecution is in the public interest ('the public interest test').
5. The court delivered its verdict in this case on 16 and 18 August 2005 (see press release 2005/091).