A panel of the UK Upper Tribunal for Financial Services ruled that the Financial Services Authority did not make out the case that the conduct of a proprietary trader of coffee futures and associated derivatives, such as call and put options, constituted market abuse under Section 118 of the Financial Services and Markets Act. In an opinion by Judge Berner, the Tribunal found that, taking all the evidence into account, the trading by the proprietary trader was carried out for legitimate reasons and in conformity with accepted market practices on the coffee futures market. The Upper Tribunal is a specialized judicial body that decide disputes in particular areas of law involving appeals from government agencies.
Hobbs v. Financial
Services Authority, Nov. 22, 2012, Upper Tribunal (Tax and Chancery Chamber)
Financial Services, FS/2010/0024.
The Upper Tribunal noted that market abuse of the nature alleged cannot be shown by mere words; there must be a correlation between those words and the actions that are said to constitute abuse. It is not enough for someone to talk about a potentially abusive transaction if he does not subsequently act with the intention of putting it into effect. Further, the Authority's case on whether the trader was a fit and proper person for the purpose of Section 56 of the FSMA rested on a combination of his alleged conduct in committing market abuse and then lying about it. While the Tribunal found that the trader’s assertions that he was engaged in a strategy of confusion were false, the panel also found but that he was not engaged in market abuse. In those circumstances, the Tribunal was not satisfied that the Authority has made its case that the derivatives trader is not a fit and proper person. Thus, the Tribunal directed the FSA to take no action against the trader.