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.