Court of Appeal remits the decision to impose a prohibition order on an individual to the Upper Tribunal

In Financial Conduct Authority v David Hobbs [2013] EWCA Civ 918, the Court of Appeal decided to remit to the Upper Tribunal the question of whether a prohibition order should be imposed on a trader in light of the findings made by the Upper Tribunal regarding his conduct during the Financial Services Authority’s (FSA’s) investigation and the Upper Tribunal process. The Court of Appeal decision highlights the importance of obtaining from the Financial Conduct Authority (FCA) a formal notice of discontinuance to ensure that its investigations are effectively brought to an end.

David Hobbs (the trader) conducted trading in London International Financial and Futures and Options Market (LIFFE) coffee futures and associated derivatives on a proprietary basis for his employer. On 15 August 2007, the trader instructed a commodities broker at another firm to buy a large quantity of a specific type of coffee future on the Euronext LIFFE exchange. This transaction took place shortly before the market closed and resulted in a significant increase in the price of the coffee futures as well as the Coffee Options Reference Price (CORP). The FSA investigated the trader’s conduct and alleged that it constituted a ‘manipulating transaction’ for the purposes of s118(5) FSMA. This is because, the FSA claimed, the trader’s instruction for the purchase of a large quantity of the coffee futures: gave ‘a false or misleading impression as to… the price of…’ the coffee futures (s118(5)(a) FSMA); and amounted to effecting a trade that secured the price of the coffee futures and the CORP at ‘an abnormal or artificial level’ (s118(5)(b) FSMA)…

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