On June 2, the UK Financial Services Authority (FSA) announced the imposition of a prohibition order on Andrew Charles Kerr together with a fine of £100,000 (approximately $145,000) for market abuse. At the time of his offense, Mr. Kerr was a broker with Sucden Limited. The FSA said that the company had cooperated fully with the FSA and there was no criticism of its supervision of Mr. Kerr nor of its internal procedures.

In August 2007, Client X, one of Mr. Kerr’s clients, held a 2000 contract put options position on an exchange-traded coffee futures contract. Implementing a strategy planned with Client X, Mr. Kerr executed a series of trades designed to artificially increase the price of the coffee future during the trading period when the options reference price was determined. The intent was that the resulting price change would lead to the reference price moving above the strike price so that Client X would avoid incurring a loss on its put options position. By so doing Mr. Kerr committed market abuse by creating a false or misleading impression as to the price of the coffee futures contract and the options reference price.

The FSA determined that while the strategy was instigated by Client X, Mr. Kerr actively encouraged and participated in the market manipulation. It was a serious case of market abuse. In addition, Mr. Kerr provided false and misleading information during the FSA’s investigation. This further demonstrated to the FSA that he lacked the integrity required of a fit and proper person and that he posed a risk to the FSA’s statutory objective of maintaining confidence in the financial system. Accordingly, a prohibition order and substantial fine was the appropriate penalty.

Alexander Justham, the FSA’s Director of Markets, said: “Market manipulation is a serious offence. Kerr breached the standards expected of approved persons and has paid the price. Participants in the futures and options markets should be in no doubt about how seriously the FSA views manipulation which disrupts proper pricing mechanisms and risks a false market in the underlying commodity.”

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