UK FSA fines and bans independent trader for market abuse

The UK Financial Services authority, or FSA, announced last week that it has fined self-employed trader Barnett Michael Alexander £700,000 for committing market abuse, and has ordered him to pay £322,818 in restitution to firms who were harmed by his actions. He is also banned from performing any FSA-regulated activity, and must hand over an additional £306,312 now held in his trading accounts to the adversely affected firms.

According to the FSA, from the January 2009 to May 2010, Alexander was operating as an independent trader, dealing in shares and retail derivatives on the London Stock Exchange (LSE) from home. His manipulation scheme consisted of entering multiple small buy and sell orders on shares. Contracts for differences, or CFDs, and spread bets automatically track the price of shares, so Alexander’s small orders began to result in large differences. He made £629,130 trading CFDs and spread bets at prices he had created. Furthermore, Alexander was able to shield his behavior from suspicion by using client names to conduct his business.

However, in December 2009 a retail broker noticed that something was awry, and ordered an investigation. When they realized what Alexander was up to, they notified the FSA. In May 2010 the FSA obtained an injunction freezing £1 million in his assets and further restraining him from continued market abuse. Said the FSA’s acting director of enforcement and financial crime, Tracey McDermott: “The FSA views market manipulation extremely seriously. Alexander’s behaviour was deliberate and repeated over a significant period of time. He sought to conceal his trading and made substantial profits at the expense of the firms which allowed him to trade with them. The court action shows the FSA’s determination to use all our powers to prevent market abuse and to pursue those who commit it.”

Though formerly a financial services sector employee, Alexander was self-employed at the time. This, in addition to his full confession, lead the FSA to deal leniently with the defendant, limiting his ban on regulated activity to five years. Furthermore, his fine might otherwise have been as high as £1,000,000.

Read more about this FSA enforcement action.
Creative Commons License photo credit: Harshil.Shah

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