Two Dresdner Kleinwort traders were censured for market abuse by the United Kingdom’s Financial Services Authority. According to the FSA, Darren Morton had access to inside information about a possible new issue of Barclays floating-rate bonds in March 2007 that would offer more favorable terms than the last issue.
The FSA says that Morton shared what he knew with trader Christopher Perry and the two men sold the whole holding of the previous issue held by K2, a Dresdner investment vehicle with a portfolio containing $65 million of Barclay’s FRNs. That same day, a new issue was announced, and counterparties that bought the bonds from K2 lost some $66,000.
Rather than accept the FSA’s offer to settle and receive a fine and/or penalty at a lower amount, the two men took their case to the FSA’s tribunal authority. The regulatory committee found that the two men did not realize that they were engaging in market abuse.
While the two men were censured, they were not fined and their right to work was not challenged. The FSA cited a number of factors to explain the sanction chosen:
• The two did not make money personally from the trade.
• They have undergone market abuse training.
• No one gave them proper guidance.
• Their compliance and disciplinary records are clean.
FSA enforcement director Margaret Cole, however, noted that insider dealing is cheating regardless of the market. She promised that future offenders will be slapped with harsher sanctions.
Related Web Resources:
The FSA and the intriguing case of Dresdner Kleinwort bond managers, Guardian.co.UK, October 7, 2009
SA censures Dresdner traders over market abuse, MarketWatch, October 7, 2009
Financial Services Authority
Our stockbroker fraud lawyers represent victims of insider trading and other kinds of securities fraud. Contact our investment fraud law firm today.