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Brokerage firm fined £400,000 after breach of market abuse laws

Posted: 26th June 2019   In: Corporate Commercial

A brokerage firm has lost its appeal to reduce a penalty it received after it was found to have breached market abuse laws.

Linear Investments Ltd was fined £409,300 after it failed to act responsibly and effectively in detecting and reporting the abuses.

It had a responsibility to conduct its own post-trade surveillance, which it had failed to carry out, despite several reminders from the Financial Conduct Authority (FCA).

Linear eventually began to take steps to remedy the breach, such as acquiring an automated monitoring system. However, due to unforeseen delays, it took a year for the new system to become effective.

The FCA calculated the penalty by applying a percentage of the firm's business revenue. It allowed a 10% reduction as Linear had taken steps to remedy the issue and was not at fault for the delay.

While the firm accepted it was in breach of the law, it appealed the penalty.

It argued that the FCA had used gross revenue figures rather than net when calculating the penalty, as well as over stating the seriousness of the breach, and failing to give sufficient consideration to the fact the firm had taken steps to remedy the situation.

The Upper Tribunal ruled that the FCA had been correct to use gross revenue figures to calculate the penalty. There were many factors that affect the cost incurred by any given business. To use something other than gross revenue could make the calculation so complicated that there would be little value in using revenue as a starting point.

It also ruled that the negligence of the firm had been so serious that the FCA had been correct in its assessment and that a 10% reduction in the final total was sufficient.

Please contact Sing Li for more information about the issues raised in this article or any aspect of company law.



Posted by: Sing Li
Corporate Commercial
Luton Office