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The Financial Services Authority (FSA) has banned Graham Betton from working in financial services, following his role in a scheme that set out to ramp up the share price of Fundamental-E Investments (FEI). The Upper Tribunal (Tax and Chancery Chamber, (the Tribunal)) is considering the fine that is appropriate for his actions and will announce this at a later date.
Betton was director of agency-only stockbroker SP Bell, together with Simon Eagle who was banned and fined £2.8m by the FSA in May of this year. In 2003 Eagle bought 85% of FEI and acquired SP Bell in order to sell FEI stock to its clients, generating demand for the stock and pushing its price up. Betton 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. Betton was aware that the purpose of the scheme was to defer payment for the shares indefinitely and he personally executed at least 75 rollover trades of in excess of 340 million shares in FEI.
Betton is a stockbroker of over thirty year’s experience and, unlike Eagle, was authorised to conduct these trades for SP Bell clients. This made him integral to the success of the scheme. He worked closely with the market maker Winterflood to carry out the rollover trades and increase Winterflood’s bid/offer quote. Betton knew that there was a clear risk that many clients had not authorised their trading in FEI shares and that their apparent demand for FEI shares was not genuine.
The Tribunal concluded that it would “be wrong, damaging to market confidence and indeed unthinkable if Mr Betton were allowed to continue operating in the financial services sector”.
Margaret Cole, managing director of enforcement and financial crime, said:
"This marks the final chapter of a scheme which saw the share price of Fundamental-E Investments deliberately manipulated to the detriment of ordinary investors.
"“Betton was an experienced director of an FSA authorised firm. He knew that the trading for his clients was artificial and he worked closely with Winterflood and its traders to artificially raise the price of the stock. This betrayed his duty to his clients and as the Tribunal has agreed was damaging to market confidence."
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.
