On 9th August the FCA issued two final notices and one decision notice in respect of individuals associated with the Dubai based investor, Rameshkumar Goenka, who was fined a record figure for market abuse in 2011. A decision notice, which has been referred to the Upper Tribunal, was issued to the senior partner of an investment firm for failing to act with integrity, and final notices were issued to the compliance officer and broker at a different firm in respect of failing to act with due skill, care and diligence.
The final notice in respect of the broker, Vandana Parikh, has highlighted the FCA’s perplexing approach to those who attend training. Mrs Parikh had an unblemished 25 year history as a broker. She was approached by a contact and asked to demonstrate the workings of a closing auction to Goenka who she believed to be a potential new client. She unwittingly demonstrated to Goenka how one might manipulate share prices in a closing auction. She failed to appreciate the risk that he intended to commit market abuse even though she speculated about an ulterior motive to his trading.
What is surprising about the FCA’s decision was that in the final notice they chose to emphasise that Ms Parikh’s failing was aggravated by the fact that she had received training.
“Approved individuals should provide front–line protection against any abusive activity and not act as enablers/facilitators of such activity. Further, Mrs Parikh was not only an approved person, but she had also received training in relation to the market abuse regime. The Authority considers that this exacerbates the seriousness of Mrs Parikh’s misconduct”
It is submitted that this is a peculiar signal for the FCA to send. If one considers the converse situation, an approved person of 25 years experience who had not attended training in relation to Market Abuse should surely have been more culpable, not less. Surely the FCA does not intend to encourage individuals to mitigate their position on the basis that they had not attended training and therefore did not know that their conduct was wrong? It is tempting to conclude that the FCA’s analysis was that that Mrs Parikh was alive to the risk and did it anyway, but other parts of the final notice contradict this, noting that she was not aware of his plan.
It will clearly remain best practice for approved individuals to seek appropriate training in order to achieve the highest standards in executing their duties. However, this decision highlights that in a climate of ever more bullish regulation by the FCA, those in positions of responsibility will be judged ever more strictly against the standards and practices they have been advised to observe.
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