London - The Financial Services
Authority has frozen the assets of firms it says manipulated share prices on the
London Stock Exchange and other trading platforms, the latest sign of the
regulator's more aggressive approach to suspected abuses.
"These companies
engaged in repeated cross-platform market manipulation, which the FSA will not
tolerate," Tracey McDermott, the regulator's acting director of
enforcement and financial crime said in a statement on Thursday.
The FSA said it has
obtained an interim high court injunction preventing a number of companies from
manipulating shares and accessing assets.
The firms facing
proceedings are Da Vinci Invest, a UK-registered but Swiss-based fund
manager, a related Singapore-based company Da Vinci Invest PTE, and
Mineworld, which is registered in the Seychelles, as well as traders Szabolcs Banya, Tamas Pornye and Gyorgi Brad.
"The companies and
individuals traded across a number of UK trading platforms and the FSA
estimates that they made over one million gross profit from this
activity," the watchdog said.
The FSA said manipulation spanned
a year to July 2011 and was brought to its attention by one of the trading
platforms being used.
The companies traded
through direct market access accounts, which allow investors to trade directly
on a platform without screening by stockbrokers used to channel the orders.
It was the second day in a
row the FSA has taken action to crack down on so-called layering, which refers
to traders entering multiple orders which are cancelled almost immediately,
creating a misleading impression as to the supply and demand for the shares.
Genuine orders are then
placed to exploit the shift in prices engineered by layering.
On Wednesday the FSA said
it was fining now-defunct Swift Trade £8m.
The move is part of
crackdown on market abuse on both sides of the Atlantic, accompanied by higher
scrutiny of high frequency trading firms favoured by day traders who dart in
and out of markets at ultra high speeds to exploit tiny price differences.
The FSA resorted to its
first such injunction only last year against Scottish day trader Barnett
Alexander, who this year had to pay £1.3m in fines and other
penalties.
The FSA said on Thursday it
feared that without an injunction, a tool given to it a decade ago, there was a
risk that assets which could be used to pay fines would disappear.
"We will continue to
use injunctions more around market abuse cases," an FSA spokesperson said.
Regulators believe that
layering - along with "spoofing" or fake interest in stocks - could have
contributed to the "flash crash" that sent Wall Street into temporary
freefall last year.
The European Securities and
Markets Authority is studying tougher rules on layering, spoofing and
direct market access which are seen as key risks from high frequency trading.
