New York – Earlier this week it was reported that the U.K. Financial Services Authority (FSA) fined a TFS derivatives broker £252,239 for paying kickbacks to a hedge-fund trader. The broker, Fabio Massimo De Biase, was also banned for life from working in the financial services industry.
The hedge fund trader, Anjam Ahmad, worked for AKO Capital LLP and was charged for insider dealing. He was given a 10 month prison sentence which was suspended for two years, forced to complete 300 hours of community service and fined £50,000. He also agreed to pay back the £131,000 profit he made from kickbacks to the FSA after they brought civil charges against him.
The penalties these two individuals faced could be seen as severe by some and indeed that is exactly the point. Margaret Cole, the FSA enforcer stated that “This substantial fine and the ban from working in the financial services industry are significant penalties and should serve as a reminder that such behavior is woefully short of that expected of approved persons and will not be tolerated.” The penalties also highlight a new attitude from the FSA which has been attempting to distance itself from the noninterventionist stance it had generally adopted prior to the financial crisis.
What is perhaps most interesting about this case is fact that the individuals perpetrating the crime were the ones punished rather than the corporations they worked for. Simon Morris, of law firm CMS Cameron McKenna, stated that “The threat of a large personal fine, reprimand or ban will always be more effective than the risk of a corporate fine.”
In this case, Mr. Ahmad did not get his firm’s clients the best execution rates possible (and was bribed not to do so). While this particular case did not specifically involve research, the implication is that regulators are going to scrutinize commissions more closely. This particular case is fairly black and white in terms of wrongdoing however there are other instances where the rules over what is allowable and what is not are more blurred. Integrity has already seen a great interest from its clients in terms of what is allowable under Section 28(e) and the personal fines levied in this case will only serve to underscore the reasons behind this interest.