The Financial Services Authority announced today that it has fined a Mr Rameshkumar Goenka of Dubai US$6,517,600 (approximately £4 million) plus a restitution element of US$3,103,640 (approximately £2 million) for manipulating the closing price of Reliance Industries securities on the London Stock Exchange. This is the largest fine that the FSA has ever imposed on an individual – the previous record was £2.8 million. The FSA press release is here and the Final Notice is here.
The FSA found that Mr Goenka engaged in market abuse contrary to section 118(5) of the Financial Services and Markets Act 2000 by effecting orders to trade which gave a false or misleading impression as to the demand for and price of Reliance GDRs, in the following way:
“On 18 October 2010 Goenka placed orders and executed trades which artificially inflated the closing price of Reliance securities. Goenka had arranged for a pre-planned series of substantial and carefully timed orders to be placed in the final seconds of the LSE’s closing auction. The orders were placed and the trades executed with the intention of increasing the closing price of the Reliance securities above a certain level. The timing of the substantial orders was intended to ensure that market participants had insufficient time to respond before the closing price was determined.
Goenka held an over-the-counter (OTC) structured product which matured on 18 October 2010 and for which the pay-out depended on the closing price of Reliance securities that day. By increasing the closing price Goenka avoided a loss of $3,103,640 under the terms of the structured product. The bank, which was the counterparty to the structured product, overpaid Goenka $3,103,640 as a result of his manipulation of the Reliance closing price.”
Section 118(5) of the Financial Services and Markets Act 2000 can be read here. The FSA had jurisdiction as the Reliance GDRs are qualifying investments admitted to trading on a prescribed market (i.e. the London Stock Exchange) within the terms of section 118(1)(a) of the Act.
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