The Financial Services Authority (FSA) today won its market abuse case in the Court of Appeal against Winterflood and two of its traders, Stephen Sotiriou and Jason Robins. The appeal hearing follows an earlier finding of market abuse by the Financial Services and Markets Tribunal (the Tribunal).
The decision by the Court of Appeal means that Winterflood, Sotiriou and Robins will now be required to pay their fines of £4 million, £200,000 and £50,000 respectively. The Court of Appeal also ordered that Winterflood, Sotiriou and Robins pay the FSA’s costs of the appeal of £52,500.
Winterflood is an FSA authorised firm and the largest market maker on the AIM market. In June 2008, the FSA found that Winterflood and its traders had played a pivotal role in an illegal share ramping scheme relating to Fundamental-E Investments Plc (FEI), an AIM listed company. In particular, the market maker had misused rollovers and delayed rollovers thereby creating a distortion in the market for FEI shares and misleading the market for about six months in 2004. Winterflood made about £900,000 from trading in FEI shares, its single most profitable stock at the time.
Winterflood, Sotiriou and Robins challenged the FSA’s finding at the Tribunal which, in March 2009, found that they had committed market abuse. They subsequently appealed the Tribunal’s decision at the Court of Appeal.
Margaret Cole, director of enforcement at the FSA, said:
"Winterflood allowed highly profitable trades to go ahead despite clear warnings that something was amiss. Their actions led to serious losses for investors and damaged market confidence. This was well below the standards expected of a leading market maker which is why they will be paying a substantial fine.
"The importance of this case is underscored by Winterflood’s determination to challenge our finding of market abuse. We are pleased that both the Court of Appeal and the Tribunal agreed with our finding. This case has taken time to resolve because of the legal challenges. It should, however, serve as a clear message to other market participants that we are determined to stamp out market abuse and that we will not back down simply because cases are tough and hard fought."