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Winterflood loses market abuse appeal

The FSA last week won its market abuse case in the Court of Appeal against market-maker Winterflood and two of its traders, Stephen Sotiriou and Jason Robins.

The appeal hearing follows an earlier finding of market abuse by the Financial Services and Markets Tribunal.

The appeal decision means that Winterflood, Sotiriou and Robins will be required to pay their fines of £4m, £200,000 and £50,000 respectively.

The court also ordered that Winterflood, Sotiriou and Robins should pay the regulator’s legal costs of £52,500.

In June 2008, the FSA found Winterflood and its traders had played a pivotal role in an illegal share ramping scheme relating to Aim-listed company Fundamental-e Investments.

In particular, the market-maker was found to have delayed rollovers, thereby creating a distortion in the market for FEI shares and misleading the market for about six months in 2004.

The company made around £900,000 from trading in FEI shares, its single most profitable stock at the time.

Winterflood, Sotiriou and Robins challenged the Financial Services and Markets Tribunal’s ruling which, in March 2009, ruled that market abuse had been committed.

FSA director of enforcement Margaret Cole says: “Winterflood allowed highly profitable trades to go ahead despite clear warnings something was amiss. Their actions led to serious losses for investors and damaged market confidence. This was well below the standards expected of a leading market-maker, which is why they will be paying a substantial fine. The importance of this case is underscored by Winterflood’s determination to challenge our finding of market abuse. We are pleased that both the Court of Appeal and the tribunal agreed with our finding.”


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