The FSA has fined Samuel Kahn £1,094,900 and secured its first final High Court injunction restraining him from committing market abuse.
Between March 24 and April 30 last year Kahn co-ordinated a scheme to deliberately inflate the share price of Global Brands Licensing plc, a company quoted on PLUS Stock Exchange.
Kahn controlled the vast majority of the trading in GBL’s shares in March and April 2010, disguising his involvement in the scheme by repeatedly impersonating other people when placing orders to trade in GBL’s shares and co-ordinating trading conducted by third parties.
The trading moved GBL’s share price from 2p on March 24, 2010 to 5.25p at its height on April 20 2010. The profits from this trading were withdrawn from a third party’s bank account at Kahn’s instruction and delivered to him in cash.
The scheme also involved a significant proportion of GBL’s shares being donated to charities. These donations were designed to take advantage of GBL’s artificially inflated share price for tax relief purposes and facilitate boiler room activities. This part of the scheme was not successful as GBL’s shares were suspended by PLUS on April 30.
Kahn has never worked at an authorised firm regulated by the FSA but he was investigated by the FSA in 2007 for his involvement in overseas boiler room activities.
In 2008 the FSA made Kahn bankrupt after he admitted liability for claims totalling up to £3.7m made by the FSA on behalf of about 800 investors.
In light of Kahn’s previous misconduct and his more recent actions in GBL, the FSA has obtained an injunction at the High Court restraining Kahn from committing market abuse in future.
This is the first time the FSA has exercised its powers under the Financial Services and Markets Act 2000 to obtain a final injunction against an individual to restrain market abuse.
FSA acting director enforcement and financial crime Tracey McDermott says: “Kahn undertook a month-long campaign of market abuse, manipulating 85 per cent of the buy trades and 91 per cent of the sell trades of GBL for his own financial benefit as well as to facilitate tax relief fraud and boiler room activities.
“The FSA views Kahn’s conduct as particularly serious due to his prior misconduct and previous action taken against him by the FSA. In imposing a significant fine under our new penalties regime and obtaining an injunction against Kahn, we want to send a clear message to the market. The FSA will not tolerate this type of repeat behaviour and will use all of our powers to ensure credible deterrence.”
Law firm CMS Cameron McKenna partner Simon Morris says the fine and the injunction is a remarkable first for the FSA.
But he adds: “However, this is a typical case of a fringe operator flouting the rules. Until the FSA digs into mainstream insider dealing the risk remains that the City will not take the message seriously.”