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Equities broker banned and fined £250k for paying kickbacks

The FSA has fined and banned a former cash equities broker £252,239 for paying kickbacks to a hedge fund trader in return for broking business.

Fabio Massimo De Biase was a cash equities broker working at TFS Derivatives who was paid a proportion of the commission revenue he generated from winning broking business.

Between January 2008 and September 2009 he paid £131,000 in kickbacks to Anjam Ahmad, a hedge fund trader at AKO Capital LLP in return for Ahmad giving broking business to De Biase.

On 20 occasions in 2008 and 2009, Ahmad and De Biase agreed between them that a higher level of commission would be charged to AKO, using enhanced commissions called ‘declined improvements’.

This system was designed to reward exceptionally good performance on the part of the broker, but was used by Ahmad and De Biase to increase the amount of money available to them to split. The standard commission rate was 0.05% or 5 basis points, but on these occasions the level of commission averaged 46 bps.  This represented an overcharge to AKO of $739,000.

The amount of net commission retained by De Biase under this arrangement was £198,000. The FSA has required De Biase to disgorge this sum as well as imposing an additional penalty.

FSA managing director of enforcement and financial crime Margaret Cole says: “De Biase exploited the trust of his employer and his client. This sort of behaviour has no place in the financial services industry. This substantial fine and the ban from working in the financial services industry are significant penalties and should serve as a reminder that such behaviour is woefully short of that expected of approved persons and will not be tolerated.”

In a final notice on June 22, 2010 Anjam Saeed Ahmad was required to pay the disgorgement of his profits, which amounted to £131,000, for his role in this misconduct.

Separately, Ahmad was also sentenced to 10 months imprisonment, suspended for two years, 300 hours of unpaid work in the community and fined £50,000 for insider dealing.

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