FSA fines Winterflood and traders £4.25m

The FSA has fined Winterflood, the largest market-maker on AIM, and two of its traders £4.25m for market abuses.

Winterflood and traders Stephen Sotiriou and Jason Robins lost their case in the Court of Appeal, meaning they must now pay their fines of £4m, £200,000 and £50,000 respectively.

The Court of Appeal also ordered Winterflood, Sotiriou and Robins to pay the FSA's costs of the appeal of £52,500.

In June 2008, the FSA found Winterflood and its traders had played a pivotal role in an illegal share ramping scheme relating to Fundamental-E Investments Plc (FEI), an AIM listed company.

Share ramping is the process of influencing the share price of a company and then taking advantage.

In particular, the FSA found the market maker had misused rollovers and delayed rollovers thereby creating a distortion in the market for Fundamental-E Investments Plc (FEI) shares and misleading the market for about six months in 2004.

Winterflood made about £900,000 from trading in FEI shares; its single most profitable stock at the time.

Winterflood, Sotiriou and Robins challenged the FSA's finding at the Tribunal which in March 2009 found they had committed market abuse. They subsequently appealed the Tribunal's decision at the Court of Appeal.

Director of enforcement at the FSA Margaret Cole says: "Winterflood allowed highly profitable trades to go ahead despite clear warnings that something was amiss.

"Their actions led to serious losses for investors and damaged market confidence. This was well below the standards expected of a leading market maker which is why they will be paying a substantial fine."

She added the case had taken longer to resolve because of the legal challenges, but said the appeal decision should "serve as a clear message" to other market participants the FSA is determined to stamp out market abuse and will not back down, even on "tough and hard fought" cases.