Articles - FSA fines individual £1m


FSA fines individual £1m and secures first final High Court injunction to prevent market abuse

 The Financial Services Authority (FSA) has fined Samuel Kahn £1,094,900 and obtained a High Court injunction restraining him from committing market abuse.

 This is the first time the FSA has secured a final injunction from the High Court to prevent market abuse and also the first fine calculated under the new penalties system.

 Between 24 March 2010 and 30 April 2010, Kahn co-ordinated a scheme to deliberately inflate the share price of Global Brands Licensing plc (GBL), a company quoted on PLUS Stock Exchange ("PLUS") a Recognised Investment Exchange.  Kahn orchestrated and controlled the vast majority of the trading in GBL's shares in March and April 2010, disguising his involvement in the scheme by repeatedly impersonating other people when placing orders to trade in GBL's shares and co-ordinating trading conducted by third parties.

 The trading moved GBL's share price from 2p on 24 March 2010 to 5.25p at its height on 20 April 2010.  The profits from this trading were withdrawn from a third party's bank account at Kahn's instruction and delivered to him in cash. 

 The scheme also involved a significant proportion of GBL's shares being donated to charities.  These donations were co-ordinated by Mr Kahn and aimed at illegitimately taking advantage of GBL's artificially inflated share price for tax relief purposes and for the purpose of facilitating boiler room activities.  This aspect of Mr Kahn's scheme was not fully implemented due to the suspension of GBL's shares by PLUS on 30 April 2010.

 Kahn has never worked at an authorised firm regulated by the FSA but he was the subject of an FSA investigation and enforcement action in 2007 for his involvement in overseas boiler-room activities. In 2008 the FSA made Kahn bankrupt after he admitted liability for claims totalling up to £3.7 million made by the FSA on behalf of about 800 investors. 

 In light of Kahn's previous misconduct and his more recent actions in GBL, the FSA has obtained an injunction at the High Court restraining Kahn from committing market abuse in future. This is the first occasion on which the FSA has exercised its powers under the Financial Services and Markets Act 2000 to obtain a final injuncton against an individual to restrain market abuse.

 Tracey McDermott, acting director of enforcement and financial crime, said:

 "Kahn undertook a month-long campaign of market abuse, manipulating 85% of the buy trades and 91% of the sell trades of GBL for his own financial benefit as well as to facilitate tax relief fraud and boiler room activities.  He impersonated other individuals to conceal his involvement and the scheme was only halted due to the suspension of GBL's shares on PLUS.

 "The FSA views Kahn's conduct as particularly serious due to his prior misconduct and previous action taken against him by the FSA.  In imposing a significant fine under our new penalties regime and obtaining an injunction against Kahn, we want to send a clear message to the market.  The FSA will not tolerate this type of repeat behaviour and will use all of our powers to ensure credible deterrence."

 The fine is the first calculated under the FSA's new penalties regime introduced on 6 March 2010. It consists of disgorgement of £210,563 and a financial penalty of £884,365, leading to a total fine of £1,094,900 after rounding down.  Kahn qualified for a Stage 1 (30%) discount on the penalty amount under the FSA's settlement discount scheme.  The fine of £1,094,900 reflects this discount. Without the discount, the financial penalty element of the fine would otherwise have been £1,263,379.

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