FSA fines investor £6.1m for market abuse
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The FSA has fined a Dubai-based investor £6.1m in what is the regulator’s largest ever fine imposed on an individual for market abuse.
Rameshkumar Goenka’s fine for manipulating the closing price of Reliance Industries securities on the London Stock Exchange comprises a penalty of about £4m and restitution of about £2m to reimburse the bank which overpaid Goenka as a result of his market abuse.
On October 18 last year 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 structured product which matured on October 18 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 £1.9m under the terms of the structured product.
Goenka had planned to engage in similar behaviour in relation to a separate structured product in April 2010 but on that occasion no actual trading took place due to events beyond his control.
FSA acting director of enforcement and financial crime Tracey McDermott says: “Goenka’s structured product was an investment that would have made him a considerable profit had it been successful for him. When he saw that it was not going to produce the desired result Goenka manipulated the market to avoid a substantial loss.
“The impact of such behaviour goes far beyond one counterparty. Market confidence will suffer if participants cannot be satisfied that the price of quoted securities reflects the proper interplay of supply and demand.”
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Readers' comments (6)
Sean | 9 Nov 2011 11:02 am
I often wonder if the counter parties on these products manipulate the market to avoid payouts and if the FSA keep an eye on this?
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Derek Bradley ceo PanaceaIFA.com | 9 Nov 2011 11:12 am
A good call and well done FSA. this is what good regulation is actually about. Catching out a very bad boy.
But, does FSA jurisdiction extend to Dubai, how will the fine be enforced and given what was done why is this not the subject of a criminal investigation?
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Peter Herd | 9 Nov 2011 11:36 am
Tip of the iceburgh !!
How many other are fixing the market e.g. endless speculation in the media to drive prices down which is never investigated by the FSA.
How many of the big boys are releasing press statements about market worries only to buy in when the prices collapse.
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Olivier Dacourt | 9 Nov 2011 11:59 am
Jail for 10 years is what is required not fines
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john | 9 Nov 2011 12:12 pm
let's hope they follow up with an anlaysis of whether the investment banks have been doing some of the same
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Anonymous | 9 Nov 2011 7:42 pm
Derek, just FYI market abuse is a civil not a criminal offence.
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