Only the second time that the FSA has obtained a permanent injunction against a person in connection with market abuse
We reported in this post on 25 May 2011 that the Financial Services Authority (the FSA) had, for the first time, obtained a final injunction restraining an individual from committing market abuse. The FSA announced today that it has secured another permanent injunction similarly restraining another individual, Mr Barnett Michael Alexander. The making permanent of that injunction follows the granting of a temporary injunction against Mr Alexander in May 2010. The FSA press release concerning Mr Alexander is here and the FSA Final Notice for Mr Alexander is here.
Publication of the injunction
The Final Notice for Mr Alexander is of particular interest as it contains (at Annex 2) a copy of the injunction that was granted. The offence committed by Mr Alexander, a former private client stockbroker, is summarised in the FSA press release as follows:
“In the period 1 January 2009 to 25 May 2010 Alexander, an experienced trader and former private client stockbroker, was operating as a self-employed trader dealing in shares and retail derivative products such as contracts for differences (CFDs) and spread bets from his home address.
Alexander manipulated the prices of shares on the London Stock Exchange by entering multiple small orders to buy and sell shares. The purpose of these orders was to manipulate the price of CFDs and spread bets, which track the price of shares. Alexander generated £629,130 by trading CFDs and spread bets at the prices he created through his share price manipulation, and frequently used CFD and spread betting accounts in the names of third parties to disguise his behaviour. This manipulation of the prices of shares and derivatives at the expense of the firms amounts to market abuse.
In May 2010 the FSA obtained a temporary injunction from the High Court preventing Alexander from committing market abuse, and froze £1 million of his assets. This was the first FSA injunction preventing market abuse. The High Court has now made that order permanent and has ordered Alexander to pay the fine and restitution. The permanent injunction is the second the FSA has obtained against an individual for market abuse.”
The injunction granted by the High Court requires that:
“[Mr Alexander] must not, whether by himself or his servants or agents, in the circumstances indicated in section 118A of the Financial Services and Markets Act 2000 (“the Act”), effect transactions or orders to trade in relation to qualifying investments admitted to trading on a prescribed market (within the meaning of section 118(1)(a) of the Act) or in respect of which a request for admission of trading on such a market has been made at a time when either he, or a person under his influence or control, or a person for whom he acts as agent, is intending, within one hour (ignoring times when that market is not open for trading), to enter into a transaction in relation to any investment the price or value of which depends on the price or value of that security.”
And contains this penal notice:
“IF YOU BARNETT MICHAEL ALEXANDER DISOBEY THIS ORDER YOU MAY BE HELD TO BE IN CONTEMPT OF COURT AND MAY BE IMPRISONED, FINED OR HAVE YOUR ASSETS SEIZED
ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS BARNETT MICHAEL ALEXANDER TO BREACH THE TERMS OF THIS ORDER MAY ALSO BE HELD TO BE IN CONTEMPT OF COURT AND MAY BE IMPRISONED, FINED OR HAVE THEIR ASSETS SEIZED”
The effect of an injunction restraining an individual from committing market abuse is effectively to criminalise the civil offence of market abuse. The offence of market abuse is contained in section 118 of the Financial Services and Markets Act 2000 (FSMA 2000) and is summarised by the FSA here.
The FSA has also banned Mr Alexander from performing any function in relation to a regulated activity.
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