FSA gives record $9.6m fine for market abuse

Steve Dinneen
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THE FINANCIAL Services Authority (FSA) yesterday handed down a record $9.6m (£6m) fine for market abuse.

Dubai-based Rameshkumar Goenka was ordered to return $3.1m to an unnamed bank and pay a $6.5m fine for manipulating the price of shares in Reliance Industries.

The FSA said he artificially inflated the price of the firm’s stock by buying a vast quantity of shares in the seconds before the bell in order to avoid taking heavy losses on a structured product linked to its closing price.

The fine is more than twice the size of the FSA’s previous record penalty on an individual – a £2.8m fine on former broker Simon Eagle for market abuse last year.

Tracey McDermott, acting director of enforcement at the FSA, said: “The impact of such behaviour goes far beyond one counterparty. Market confidence will suffer if participants cannot be satisfied that the price of quoted securities reflects the proper interplay of supply and demand.”

The financial watchdog said Goenka had planned a similar scam earlier this year but was forced to abandon the scheme “due to events beyond his control”.

The case against Goenka included audio evidence gathered by the FSA’s enforcement team.

The penalty would have been even higher but Goenka was given a 30 per cent discount for settling with the regulator at an early stage. He denied intentionally committing market abuse and said his scheme was similar to tactics used by banks.

Last year Eagle was handed a £2.8m fine for creating a scheme to artificially inflate the price of shares in Aim-listed Fundamental-E Investments (FEI). He was also banned from ever working in the financial services sector again.