Brothers handed suspended sentences for insider trading

The brothers were both seasoned traders boasting over 20 years’ worth of experience within the UK and overseas and having fostered an extensive network of contacts across the investment community.

The FCA uncovered their misconduct through its market surveillance tools used to detect suspicious behaviour. A subsequent investigation found that, within minutes of receiving confidential information, the brothers had co-ordinated and executed trades, in turn making a profit of nearly £43,000.

However, the court has ordered them to pay back more than £280,000, thereby reflecting the full value of the shares traded through their criminal conduct, not just the profit they made.

Succumbing to greed  

Steve Smart, executive director of enforcement and market oversight at the FCA, stated: “Greed got the better of them. The West brothers knew the rules and still chose to break the law. This should serve as a reminder that the FCA will take action against those who abuse their position and break the law, including by depriving them of their ill-gotten gains.”

The initial recipient of the inside information, Matthew West was regularly approached by brokers with investment opportunities, which were subject to strict confidentiality agreements. The opportunities often related to upcoming capital raising plans at companies listed on the Alternative Investment Market (a sub-segment of the London Stock Exchange designed for smaller and high-growth businesses).

While Matthew West received the inside information via legitimate broker communications, he unlawfully disclosed this information to his brother Nikolas. Messages between the pair revealed specific details of the confidential information being shared and showed them discussing how to secure the best profit before the announcements were made public.

Trading on the information

They then traded on the information, with most of the trading undertaken by Matthew West. Both were fully aware that their actions breached market rules and undermined the integrity of the financial system.

In sentencing, His Honour Judge Christopher Hehir remarked: “Markets cannot operate fairly if they are rigged by dishonest operators. Grave economic harm may result, so deterrence is important.”

This case follows on from other recent FCA enforcement actions on insider dealing, including the sentencing of Redinel Korfuzi and Oerta Korfuzi, in turn reinforcing the FCA’s ongoing commitment to tackling market abuse.