FSA Wins Winterflood market abuse case

Losses and Lawsuits

LONDON - The UK Financial Services Authority (FSA) has won its market abuse case against Winterflood, a market-maker in alternative investment market (AIM) securities. The case was launched through the Financial Services and Markets Tribunal against Winterflood and two of its traders, Stephen Sotiriou and Jason Robins. The regulator said the trades executed by the firm should have been flagged as unusual but, rather than take proper steps to check out their trades' credentials, the firm continued to trade them, leading to profits of £900,000 - its single most profitable stock at the time.

Winterflood, already fined £4 million by the regulator, had appealed against the decision last year (see OpRisk & Compliance, August 2008, page 6), while the FSA has fined Sotiriou and Robins £200,000 and £50,000 respectively. The firm misused and delayed rollovers to distort AIM-listed Fundamental-E Investments (FEI) share prices, manipulating the market for six months of 2004. In June 2008, the FSA found that Winterflood and the traders had played a crucial role in an illegal share ramping scheme relating to FEI. Winterflood did not challenge the FSA's findings but is now understood to be seeking permission to appeal - along with the two traders - through the Court of Appeal.

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