Thursday, 28 October 2010

UK: insider dealing penalty increased by Tribunal

Earlier this year the Upper Tribunal (Tax and Chancery Chamber) upheld a decision of the Financial Services Authority that an individual, Mr Scerri, had committed market abuse: see here (pdf). A separate hearing later took place to determine the penalty and, in particular, whether Mr Scerri should face a penalty of £ 20,000 in addition to disgorgement of his profits. The FSA had originally decided not to impose an additional penalty on the grounds that it would cause serious financial hardship but it was subsequently discovered that the Mr Scerri had provided the FSA with incomplete and misleading information and that he had, following notification of the proposed fine, lost significant funds through trading.

In the second hearing, the Tribunal found - see here (pdf) - that Mr Scerri's financial position was self-induced after he became aware of the proposed penalty and that the seriousness of his actions warranted the imposition of the £ 20,000 penalty. In the words of the Tribunal: "...the penalty of an amount that merely covers the insider information profit is inappropriate; it does not penalise the abuse of breach" (para. 18). The Financial Services Authority has, unsurprisingly, welcomed the Tribunal's decision: see here.

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