FCA v Da Vinci Invest Limited and others

The High Court (Snowdon J) on Wednesday 12th August exercised for the first time its powers under the Financial Services and Markets Act 2000 to impose penalties totalling over £7.5m under s.129, and to grant final injunctions to restrain market abuse under s.381. The case concerned the type of market manipulation known as ‘layering’ or ‘spoofing’ of the stock market: artificially creating small price movements and taking advantage of them.

The Judge found that the “overwhelming evidence” demonstrated that the trader defendants “must have known full well what they were doing, and that … what they were doing was wholly improper”.   In relation to the Swiss hedge fund defendant on whose behalf the trader defendants traded, the Judge found that its approach “went well beyond mere negligence” and was “irresponsible and reckless”.

S.129 FSMA has never before been used to impose penalties for market abuse; nor has the s.381 power to impose a final injunction been exercised. The Court resolved a number of jurisdictional issues, including the relationship with the FCA’s own powers to impose sanctions for market abuse. In determining the level of the appropriate penalties, the Court agreed with the FCA that although it was not bound by the FCA’s own detailed penalty framework, the framework should provide a starting point for the Court.

The full judgment can be read here: http://www.bailii.org/ew/cases/EWHC/Ch/2015/2401.html 

Javan Herberg QC and Simon Pritchard represented the FCA.