FSA obtains High Court injunction to stop market manipulation
The Financial Services Authority (FSA) has obtained an interim High Court injunction preventing a number of companies and individuals from manipulating the market in UK-listed shares. The injunction also freezes the assets of the companies.
The FSA has issued proceedings against Da Vinci Invest Ltd, a UK-registered but Swiss-based fund manager, a related Singapore-based company Da Vinci Invest PTE Ltd, and Mineworld Ltd, which is registered in the Seychelles, as well as Szabolcs Banya, Tamas Pornye and Gyorgi Brad (all of whom are resident in Switzerland and/or Hungary) who traded on behalf of those companies.
The FSA believes that these companies and individuals have committed market abuse by engaging in a form of manipulative trading known as “layering”, which created a misleading impression as to the supply and demand of shares. The companies and individuals traded across a number of UK trading platforms and the FSA estimates that they made over £1 million gross profit from this activity.
The conduct took place from August 2010 to July 2011. The manipulation was done by placing large orders for shares which they had no genuine intention of allowing to trade. These misleading orders had the effect of moving the share price up and down as the market reacted to the perceived change in supply or demand of the shares. The traders would then take advantage of the price changes by repeatedly buying shares (when the share price had been manipulated downwards) and selling them (when the share price had been manipulated upwards). At the same time, they would delete the initial orders which had manipulated the share price.
The FSA obtained an interim injunction freezing the assets of the companies on 12 July, and a further order continuing the freezing injunction and restraining the market abuse on 31 August.
Tracey McDermott, the FSA’s acting director of enforcement and financial crime, said:
“This injunction shows that the FSA will take swift and decisive action to protect the integrity of UK markets, wherever those seeking to abuse them are based. These companies engaged in repeated cross-platform market manipulation, which the FSA will not tolerate.”
The FSA’s investigation, and the associated court case, will continue.