The Court of Appeal has found in favour of the FSA in upholding the market abuse finding of the Financial Services and Markets Tribunal against Winterflood, the largest market maker on the AIM market, and two of its traders, Stephen Sotiriou and Jason Robins. The decision by the Court means that Winterflood, Sotiriou and Robins will now be required to pay their fines of £4m, £200,000 and £50,000 respectively.

In commenting on the decision Margaret Cole, the FSA's Director of Enforcement, said: "The importance of this case is underscored by Winterflood's determination to challenge our finding of market abuse. We are pleased that both the Court of Appeal and the Tribunal agreed with our finding. This case has taken time to resolve because of legal challenges. It should, however, serve as a clear message to other market participants that we are determined to stamp out market abuse and that we will not back down simply because cases are tough and hard fought."

The parties challenged the FSA's finding at the Tribunal that, in March 2009, found that they had committed market abuse (for further commentary on the Tribunal decision please click here ). They subsequently appealed the Tribunal's decision at the Court of Appeal.

Winterflood challenged the FSA's interpretation of the market abuse provisions in the Financial Services and Markets Act arguing that for there to have been market abuse under s.118 there had to be a form of subjective element or "actuating purpose" on the part of the accused to mislead or distort the market. The Court reaffirmed the view of the Tribunal by stating that the test under s.118 is wholly objective and should not be read as restricting market abuse of a kind which created a false impression or distorted the market to cases in which the transaction was motivated, at least in part, by an intention to achieve either of those results.

This is an important success for FSA which has expressed its determination to take tough action to tackle market abuse. In imposing these significant fines, FSA is demonstrating that it will take action where it believes that a firm has fallen short of the expected standards of market conduct and failed to detect warning signs whether or not there was any deliberate intention to commit an offence. It serves as an important warning to the market of the breadth of the market abuse provisions.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

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The original publication date for this article was 27/04/2010.