The FSA has banned a stockbroker from working in financial services following his role in a scheme designed to ramp up a company’s share price.
Graham Betton, a director of agency-only stockbroker SP Bell, will also be fined although the level of fine is still being decided by the Upper Tribunal (Tax and Chancery Chamber).
Betton’s ban relates to the ban in May of fellow SP Bell director Simon Eagle, who was also fined £2.8m.
In 2003 Eagle bought 85 per cent of Fundamental-E Investments and acquired SP Bell in order to sell FEI stock to its clients, generating demand for the stock and pushing its price up.
Betton instructed SP Bell staff to sell FEI shares to clients, many of whom were unaware that the shares were being bought and sold on their behalf.
In order to defer clients having to pay for the shares, many of the trades were rolled over from client to client without being settled. Betton was aware that the purpose of the scheme was to defer payment for the shares indefinitely and he personally executed at least 75 rollover trades of in excess of 340 million shares in FEI.
Betton is a stockbroker of over thirty year’s experience and, unlike Eagle, was authorised to conduct these trades for SP Bell clients. This made him integral to the success of the scheme. He worked closely with the market maker Winterflood to carry out the rollover trades and increase Winterflood’s bid/offer quote. Betton knew that there was a clear risk that many clients had not authorised their trading in FEI shares and that their apparent demand for FEI shares was not genuine.
The Tribunal concluded that it would “be wrong, damaging to market confidence and indeed unthinkable if Mr Betton were allowed to continue operating in the financial services sector”.
FSA managing director of enforcement and financial crime Margaret Cole says: “This marks the final chapter of a scheme which saw the share price of FEI deliberately manipulated to the detriment of ordinary investors.
“Betton was an experienced director of an FSA authorised firm. He knew that the trading for his clients was artificial and he worked closely with Winterflood and its traders to artificially raise the price of the stock. This betrayed his duty to his clients and as the Tribunal has agreed was damaging to market confidence.”
Trading in FEI shares was suspended in July 2004 leaving over £9m of unsettled trades which neither SP Bell nor its clients could meet. SP Bell ceased trading and went into administration.