Public Censure Against Trader for Market Abuse
A trader at Dresdner Kleinwort Limited has committed market abuse by securing the price of Lead contracts on the London Metal Exchange (LME) at an “abnormal and artificial level”, according to an Upper Tribunal (Tax and Chancery Chamber) decision upholding the decision by the Financial Services Authority.
The Upper Tribunal has issued its decision in the case of Jason Geddis, who referred a Decision Notice issued by the Financial Services Authority (FSA) on June 11 2010. The decision came after the FSA fined earlier Swift Trade £8 million for market abuse, subject to the Upper Tribunal’s action.
The Tribunal determined that Geddis committed market abuse and directed the FSA to impose a public censure on him. The FSA had proposed to prohibit and fine Geddis but the Tribunal felt that a public censure was a more appropriate penalty.
Mr Geddis, a trader at Dresdner Kleinwort Limited, was responsible for LME trading on behalf of his firm and its clients. On November 21, 2008, he built up a position in a particular Lead contract in the course of the morning.
He then unwound this position in the course of the LME’s open outcry session, at rapidly increasing prices. The FSA in its Decision Notice stated that Geddis “deliberately squeezed the market in the contract in question in order to secure substantial profits for his firm; on that basis it proposed to fine Mr Geddis and impose a prohibition order on him.”
According to the Tribunal, Geddis’ conduct in creating a disorderly market fell below the proper standard of care, but it was not a failure of integrity.
“The breach was committed through a lack of care in an exceptional situation, not through a premeditated plan to act improperly,” the FSA said.
Tracey McDermott, acting director of enforcement and financial crime, said: “We have made it clear that we are committed to taking forward difficult and challenging market abuse cases. It is inevitable that, in some of those, the Tribunal will reach a different conclusion as to the facts and the resulting sanction. Here, following a full hearing, the Tribunal has determined that the circumstances were exceptional and, as a result that the appropriate outcome is a public censure.
“The FSA considers market abuse, particularly by market professionals, to be a serious matter and we will continue to take action to deter such misconduct. However, it will be only in rare cases where the outcome is limited to a public censure.”