Two former traders at Cantor Fitzgerald LP’s London unit are challenging disciplinary penalties over four-year-old trades that the U.K. finance regulator said were designed to inflate a customer’s pay.
The Financial Services Authority’s case focuses on transactions on Dec. 31, 2007 and Jan. 31, 2008, by Cantor Fitzgerald Europe traders including Cheickh Tidiane Diallo and Patrick Sejean, according to papers filed by the regulator for a trial today in London. They were trading on the instructions of Stefan Chaligne, an equity-fund investment manager.
Chaligne “instructed CFE to buy stock with the goal of raising the price” of a company in which the fund already held shares, the FSA said in the court papers. The trades were done “on those particular dates,” because they were the days on which performance fees for Chaligne were decided, based on the fund’s value, according to the regulator.
“This is quite serious and blatant market abuse on two occasions,” a lawyer for the regulator, Andrew Mitchell, said at a hearing today.
Chaligne, a 50-year old French citizen who lives in Switzerland, is challenging a 1.17 million-pound ($1.87 million) penalty and ban from working in the U.K. finance industry. He testified today that while he didn’t know at the time that he was committing market abuse, he now accepts that he did. FSA says Chaligne made 266,924 pounds from the trades.
Stocks, ADR Receipts
He traded in eight stocks and American Depositary Receipts on European and North American stock exchanges in 2007 at a value of around 5 million pounds, giving “clear instructions” to Diallo and Sejean “that the aim of his trading was 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.
Sejean said that, while he accepts a penalty is appropriate, his 550,000-pound fine should be cut to below 10,000 pounds because of financial hardship. The FSA said today Sejean, who lives and works in Switzerland, has assets worth about 58,000 pounds.
Diallo, who was only involved in the 2007 trades, maintains a ban is too severe, the FSA said. An internal appeals panel at the FSA ruled that a 100,000-pound fine was appropriate, but that it shouldn’t be imposed because it would cause him financial hardship.
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. He now works for Makor Capital Markets in Geneva, according to the regulator.
Sejean and Diallo, who are representing themselves without lawyers, will present arguments later in the case. The trial is scheduled to last six days.
Richard Oldworth, a spokesman for Cantor Fitzgerald, declined to comment. Both Sejean and Diallo initially lied to Cantor Fitzgerald and the FSA, according to the regulator.
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