Two former traders at Cantor Fitzgerald LP’s London unit and a Swiss fund manager lost a case against the U.K. finance regulator over disciplinary penalties for committing market abuse.
Stefan Chaligne, an equity-fund investment manager, instructed Cheickh Tidiane Diallo and Patrick Sejean at Cantor Fitzgerald to trade on his behalf with the goal of driving up the share prices for certain companies. He must pay a 900,000-pound ($1.46 million) fine and 362,950 euros ($469,548) disgorgement, a London-based financial tribunal ruled today. He is also banned from working in the U.K. finance industry.
Sejean must pay a 650,000-pound fine the tribunal ruled, 100,000 pounds more than the one the FSA first sought to impose. Sejean had argued at a hearing in April that while he accepted a penalty was appropriate, the fine should have been cut to 10,000 pounds because of financial hardship.
The tribunal ruled it was “one of the rare cases” where the FSA’s internal disciplinary committee “was too lenient.” He was also banned from working in the industry.
A ban against Diallo, who had maintained that a ban was too severe, was also upheld. Before the case reached the tribunal, an internal appeals panel at the FSA ruled that a 100,000-pound fine against Diallo was appropriate, but that it shouldn’t be imposed because it would cause him financial hardship.
Chaligne, a French citizen who lives in Switzerland, requested trades through Cantor Fitzgerald on Dec. 31, 2007, and Jan. 31, 2008, according to the Financial Services Authority.
He traded in eight stocks and American Depositary Receipts valued at about 5 million pounds on European and North American stock exchanges in 2007, giving instructions to Diallo and Sejean “to make the prices of all the stocks as high as possible on the close,” the regulator said. In early 2008, Chaligne traded two stocks on European exchanges with the intent to move the price of the stock, according to the FSA.
Chaligne, who made 266,924 pounds from the trades, instructed the other men to trade on those specific dates because they were the days on which his performance fees were decided, based on the fund’s value, the regulator alleged at the April hearing.
“I am pleased that the Tribunal has decided that it was ‘not in my contemplation’ to cheat my investors,” Chaligne said in an e-mailed statement. “The Tribunal also found in my favor that, in the context of the turmoil in the markets in 2007, it was reasonable for me to fear an attack on the stocks held by the fund, which could cause them to reach unfair and inappropriate prices.”
Chaligne said he has asked that the disgorgement part of the fine be paid to his investors.
Diallo worked for Cantor Fitzgerald from 2006 until April 16, 2011, in a customer-trading role, according to the FSA register. Sejean worked for the firm from 2002 until March 16, 2011. He was a trader on the French sales desk of the firm. At the time of the trial in April, he was working for Makor Capital Markets in Geneva, according to the regulator.
“Sejean was a willing participant in Chaligne’s scheme,” said Tracey McDermott, the head of enforcement at the FSA. “Not only did he fail to prevent or report the abuse, he exploited and abused his position of trust and involved more junior traders in his misconduct. He has no place in the financial services industry.”