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The Financial Services and Markets Tribunal (the Tribunal) has issued its decision in the matter of Andre Jean Scerri and the Financial Services Authority (FSA). The Tribunal decided that it was appropriate to impose a financial penalty of £66,062.50 for market abuse. The fine represents disgorgement of profits made through the use of inside information and a penalty of £20,000 for engaging in market abuse. The Tribunal’s decision increases the penalty of £46,062.50 originally imposed by the FSA.
Scerri was a private investor in Amerisur Resources Plc (Amerisur, then known as Chaco Resources Plc). On the morning of 23 May 2007, Scerri placed an order to increase his existing position in Amerisur. Subsequent to placing that order, another private investor contacted Scerri and informed him of a placing of Amerisur shares to be announced the following day at a substantial discount to the market price. As a result, Scerri cancelled his buy order and began to sell his existing position.
He was subsequently contacted by Amerisur’s broker who formally made him an insider and invited him to participate in the placing. Scerri subsequently sold the remainder of his existing Amerisur position prior to the public announcement of the placement. He then rebuilt the majority of his position in Amerisur by subscribing for discounted shares in the placing. Scerri’s actions amounted to market abuse.
The amount disgorged principally represents the difference between the price at which Scerri sold his shares, and the discounted price at which he repurchased the majority of his position.
The FSA originally decided not to impose the penalty of £20,000 on Scerri, on the grounds that it would cause serious financial hardship. However, the FSA presented evidence to the Tribunal that: (i) the information that Scerri had provided to the FSA in connection with his financial hardship claim was incomplete and misleading; and (ii) after being notified of the proposed penalty by the FSA Scerri had invested and lost substantial funds through hundreds of trades in indices and currencies.
The Tribunal ruled that the information Scerri had provided to the FSA in connection with his financial hardship claim was incomplete and misleading, and found that Scerri’s current financial situation was a result of self-induced damage occurring after he became aware of the proposed penalty. The Tribunal considered that Scerri’s market abuse was serious and they decided to impose the additional £20,000 financial penalty irrespective of his current financial position.
Margaret Cole, managing director of enforcement and financial crime, said:
“Scerri was provided with inside information by another retail investor. He took advantage of that information by selling his existing position, and rebuilding it at a discounted price, despite knowing that he must not do so. He profited from other, unwitting investors who did not have that information. Retail investors who are given inside information must observe, like any other market participant, the responsibilities this information brings.
“The Tribunal’s decision to impose a financial penalty on Scerri in addition to the disgorgement, serves as a reminder to all that financial hardship claims will not succeed where assets have been frittered away. Scerri’s financial position was entirely of his own making and we welcome the Tribunal’s decision to reinstate the fine.”
