Read the full decision in .
\n\nMARKET ABUSE senior accountant employed by listed company\nknowledge of company s difficult relations with major customer and likely effect\non turnover and profit knowledge that talks about takeover of company by\nlarger competitor abandoned whether informed or able to conclude that profit\nwarning to market inevitable in near future whether information relevant\nyes whether information generally available no whether knowledge\ninfluenced Applicant s sales of shares and spread betting in advance of\nannouncement leading to dramatic fall in price of company s shares yes\nwhether Applicant s conduct part of an existing strategy amounting to a safe\nharbour no FSMA ss 118, 119, 122, 123 COMC burden and standard\nof proof reference dismissed\nPENALTY principles to be applied in determining amount of financial\npenalty FSMA s 124 ENF 14 recovery of abusive profit measure of\nadditional penal element penalty reduced to reflect true level of abusive\nprofit but penal element substantially undisturbed.
\n","change_history":[{"note":"First published.","public_timestamp":"2016-12-01T16:19:09Z"}],"max_cache_time":10,"metadata":{"bulk_published":true,"hidden_indexable_content":"MARKET ABUSE senior accountant employed by listed company\r\nknowledge of company s difficult relations with major customer and likely effect\r\non turnover and profit knowledge that talks about takeover of company by\r\nlarger competitor abandoned whether informed or able to conclude that profit\r\nwarning to market inevitable in near future whether information relevant\r\nyes whether information generally available no whether knowledge\r\ninfluenced Applicant s sales of shares and spread betting in advance of\r\nannouncement leading to dramatic fall in price of company s shares yes\r\nwhether Applicant s conduct part of an existing strategy amounting to a safe\r\nharbour no FSMA ss 118, 119, 122, 123 COMC burden and standard\r\nof proof reference dismissed\r\nPENALTY principles to be applied in determining amount of financial\r\npenalty FSMA s 124 ENF 14 recovery of abusive profit measure of\r\nadditional penal element penalty reduced to reflect true level of abusive\r\nprofit but penal element substantially undisturbed\r\nTHE FINANCIAL SERVICES AND MARKETS TRIBUNAL\r\nJAMES PARKER\r\nApplicant\r\nand\r\nTHE FINANCIAL SERVICES AUTHORITY\r\nRespondent\r\nTribunal: Colin Bishopp (Chairman)\r\nSandi O Neill\r\nNicholas Douch\r\nSitting in public in London on 24 to 28 April, 2 to 5 May and 8 to 11 May\r\n2006\r\nThe Applicant in person\r\nTimothy Dutton QC and George Davies, counsel, instructed by, and for, the\r\nRespondent\r\n© CROWN COPYRIGHT 2006\r\nCONTENTS\r\nPage\r\nIntroduction 1\r\nThe law relating to market abuse 3\r\nThe Financial Services and Markets Act 2000 3\r\nThe burden and standard of proof 6\r\nReference to the Tribunal 9\r\nThe facts 10\r\nPace and its business 10\r\nMr Parker s position within Pace 11\r\nPace s share option schemes 13\r\nPace s relations with NTL and NCM 14\r\nProject Pluto 18\r\nThe events of 26 and 27 February 2002 19\r\nPace s announcements to the market 21\r\nPace s share dealing rules 24\r\nMr Parker s investment strategy 27\r\nMr Parker s investment advisers 32\r\nIG Index 34\r\nMr Parker s actions between 27 February and 4 March 2002 35\r\nThe Pace Final Notice 38\r\nWhether market abuse is established 39\r\nDid Mr Parker have RINGA? 40\r\nWas Mr Parker s behaviour based on RINGA? 44\r\nDid Mr Parker s behaviour fall below the standard to be expected? 46\r\nDoes Mr Parker have a safe harbour? 46\r\nThe penalty 47\r\nThe power to impose a penalty 47\r\nThe Authority s published policy 48\r\nWhat was the Authority s proper course? 50\r\nThe abusive profit 51\r\nThe punitive element 53\r\nConclusions 56\r\n1\r\nDECISION\r\nIntroduction\r\n1. The Applicant, James Parker, has referred to the Tribunal a decision notice\r\naddressed to him by the Authority s Regulatory Decisions Committee ( RDC ) on\r\n24 March 2004. The notice recorded the RDC s conclusion 5 that Mr Parker had\r\nengaged in market abuse between 27 February and 4 March 2002 when dealing in\r\nand spread betting on shares in his employer, Pace Micro Technology plc\r\n( Pace ), which was at all material times listed on the London Stock Exchange,\r\nand its decision to impose a penalty of £300,000 upon him for that conduct. Mr\r\n10 Parker denies that he has been guilty of market abuse and he also contends that if,\r\ndespite his denial, he is liable to a penalty, the amount imposed by the Authority\r\nis excessive, that it has been determined by reference to an inflated perception of\r\nhis profits, and that the RDC dealt with him in an unfair manner which is\r\ninconsistent with its approach to failings of Pace itself.\r\n15 2. The Authority s case, in summary, is that Mr Parker, a chartered accountant\r\nwho was at the relevant time employed by Pace as its credit risk and treasury\r\nmanager, sold holdings of shares in his and his wife s names, adjusted spread bets\r\nhe had previously placed and placed new spread bets in the short interval between\r\nhis learning on 27 February 2002 that a possible takeover of Pace by a much\r\n20 larger competitor had been abandoned and that Pace, for other reasons, was very\r\nlikely to issue a profit warning within the next few days, and the publication of\r\nthat warning early on the morning of 5 March 2002. It says that the information\r\nwas not generally available, that Mr Parker relied on it, and that he did so in order\r\nto reduce or eliminate losses he would otherwise have suffered, and in order to\r\n25 gain by his spread betting, when (as in fact happened) the price of Pace shares fell\r\nsubstantially following the publication of the profit warning.\r\n3. Mr Parker agrees that the transactions identified by the Authority took\r\nplace. He denies that he relied on information which was not generally available;\r\nit was, he argues, all in the public domain. Additionally, he says, he was carrying\r\n30 out a pre-conceived strategy of hedging shares he and his wife owned and share\r\noptions which had been granted to him, that the transactions do not reveal any\r\nchange in his strategy on and after 27 February 2002, and that in consequence he\r\nhas a safe harbour. He accepts that he did profit from the fall in the share price\r\n(although, taken individually, some of his transactions led to losses) but he\r\n35 disputes the Authority s assessment of his abusive profit (assuming that there was\r\nany abuse). The transactions, and the profit or loss to which each led, are agreed;\r\nthe dispute between the parties relates to the question whether there was any\r\nabuse and, if so, to the determination of the items to be included in the calculation\r\nof the abusive profit. The RDC s perception, when the penalty was imposed, was\r\n40 that Mr Parker s net profit amounted to £153,942, and that it should be treated as\r\nabusive, but in its re-re-re-amended statement of case the Authority acknowledges\r\nthat this was the extent of Mr Parker s net profit in the whole of the quarter to\r\nMarch 2002 (which Mr Parker agrees) and advances the argument that the abusive\r\nprofit may have amounted to as much as £164,617. It accepts that this figure too\r\n45 may not be correct; we will return later in this decision to the determination of the\r\n2\r\nprofit. The penalty of £300,000 was designed to recover the profit and to include\r\nan additional, purely punitive, element.\r\n4. Mr Parker represented himself at the hearing, while the Authority was\r\nrepresented by Timothy Dutton QC, leading George Davies. We had a\r\nconsiderable volume of documentary evidence, and heard 5 oral evidence from\r\nseveral witnesses. We are grateful to Mr Dutton for his careful presentation of the\r\nAuthority s case, and we should record too that Mr Parker, despite his lack of\r\nlegal training, presented his own case with moderation and skill. His marshalling\r\nand presentation of documentary evidence was exemplary, and most helpful.\r\n10 5. We heard evidence from the following witnesses:\r\nEdmond Warner, an expert on spread betting, engaged by the\r\nAuthority ;\r\nAnthony Dixon, Pace s company secretary;\r\nNicholas Williams, then Pace s financial controller and Mr Parker s\r\n15 immediate superior;\r\nJonathan Bown, also an accountant employed by Pace who reported\r\ndirectly to Mr Williams;\r\nAndrew Bartles and Andrew McCarthy, the joint heads of BPR\r\nFinancial Management, the financial services division of a firm of\r\n20 chartered accountants based in Yorkshire;\r\nRoger Hambury, Peter Martin, Darren Sinden and Giles Wilkes, at the\r\ntime relevant to this reference all employees of IG Index plc or IG\r\nMarkets Limited (together, IG );\r\nIan Hooper, a broker employed by Redmayne Bentley, stockbrokers;\r\n25 Andrew Paxton, Redmayne Bentley s compliance officer;\r\nIan West, then a strategic adviser employed by NTL Group, the parent\r\nof a United Kingdom subsidiary ( NTL ), at the time one of Pace s\r\nlargest customers if not its largest;\r\nStewart Kinloch and David Major, employees of a company then\r\n30 known as Gerling NCM NV ( NCM ), which provided trade credit\r\ninsurance to Pace;\r\nMr Parker; and\r\nJohn Rufford, a barrister employed by the Authority, who participated\r\nin the investigation.\r\n35 We had also the statements of Colin Hatton, another employee of NCM who was\r\nprevented by illness from attending the hearing, and of Steve Law and David\r\nHacon, officers of the Authority, whose evidence was purely formal. Mr Parker\r\nhad produced statements from his wife, Timothy Gill, a colleague who was also\r\nacquainted with him socially, and Maureen Roberts, Pace s credit control\r\n40 manager, who had reported directly to Mr Parker, but the statements were not\r\nagreed and none of the three witnesses gave oral evidence.\r\n3\r\n6. We intend to deal first with the law relating to market abuse since the\r\nsignificance of much of the evidence will be difficult, and in some cases\r\nimpossible, to grasp without an understanding of the legal principles. Thereafter\r\nwe deal with the burden and standard of proof. We come next to the facts. In\r\ndescribing them we do not intend to set out the evidence 5 of the witnesses, one\r\nafter the other (indeed, we do not need to mention some of the witnesses by\r\nname), but instead to deal with the facts (many of which were agreed) on a topicby-\r\ntopic, rather than chronological, basis, identifying those matters of dispute\r\nwhich arose, describing the evidence relating to those matters, and setting out our\r\n10 findings. We then draw the law and the facts together in our consideration of Mr\r\nParker s conduct and of the allegation that it amounted to market abuse. Finally\r\nwe deal with the law, code of conduct and practice relevant to the imposition of a\r\npenalty, and address the amount of the penalty which it is appropriate to impose in\r\nthis case, if market abuse is established.\r\n15 The law relating to market abuse\r\nThe Financial Services and Markets Act 2000\r\n7. The starting point for identifying the meaning of the term market abuse ,\r\nand the various matters we must bear in mind when deciding whether Mr Parker is\r\nguilty of it in relation to any of his transactions, is section 118 of the Financial\r\n20 Services and Markets Act 2000 ( the FSMA ). The section was amended\r\nsubstantially in 2005, to reflect a European Directive, but the amendment has no\r\nretrospective effect. At the material time it read:\r\n(1) For the purposes of this Act, market abuse is behaviour (whether by one\r\nperson alone or by two or more persons jointly or in concert)\r\n25 (a) which occurs in relation to qualifying investments traded on a market\r\nto which this section applies;\r\n(b) which satisfies any one or more of the conditions set out in subsection\r\n(2); and\r\n(c) which is likely to be regarded by a regular user of that market who is\r\n30 aware of the behaviour as a failure on the part of the person or persons\r\nconcerned to observe the standard of behaviour reasonably expected\r\nof a person in his or their position in relation to the market.\r\n(2) The conditions are that\r\n(a) the behaviour is based on information which is not generally available\r\n35 to those using the market but which, if available to a regular user of\r\nthe market, would or would be likely to be regarded by him as\r\nrelevant when deciding the terms on which transactions in investments\r\nof the kind in question should be effected;\r\n(b) the behaviour is likely to give a regular user of the market a false or\r\n40 misleading impression as to the supply of, or demand for, or as to the\r\nprice or value of, investments of the kind in question;\r\n(c) a regular user of the market would, or would be likely to, regard the\r\nbehaviour as behaviour which would, or would be likely to, distort the\r\nmarket in investments of the kind in question.\r\n4\r\n(3) The Treasury may by order prescribe (whether by name or by description)\r\n(a) the markets to which this section applies; and\r\n(b) the investments which are qualifying investments in relation to those\r\nmarkets.\r\n(4) The order may prescribe different investments or descriptions 5 of investment\r\nin relation to different markets or descriptions of market.\r\n(5) Behaviour is to be disregarded for the purposes of subsection (1) unless it\r\noccurs\r\n(a) in the United Kingdom; or\r\n10 (b) in relation to qualifying investments traded on a market to which this\r\nsection applies which is situated in the United Kingdom or which is\r\naccessible electronically in the United Kingdom.\r\n(6) For the purposes of this section, the behaviour which is to be regarded as\r\noccurring in relation to qualifying investments includes behaviour which\r\n15 (a) occurs in relation to anything which is the subject matter, or whose\r\nprice or value is expressed by reference to the price or value, of those\r\nqualifying investments; or\r\n(b) occurs in relation to investments (whether qualifying or not) whose\r\nsubject matter is those qualifying investments.\r\n20 (7) Information which can be obtained by research or analysis conducted by, or\r\non behalf of, users of a market is to be regarded for the purposes of this\r\nsection as being generally available to them.\r\n(8) Behaviour does not amount to market abuse if it conforms with a rule which\r\nincludes a provision to the effect that behaviour conforming with the rule\r\n25 does not amount to market abuse.\r\n(9) Any reference in this Act to a person engaged in market abuse is a reference\r\nto a person engaged in market abuse whether alone or with one or more\r\nother persons.\r\n(10) In this section30\r\nbehaviour includes action or inaction;\r\ninvestment is to be read with section 22 and Schedule 2;\r\nregular user , in relation to a particular market, means a reasonable person\r\nwho regularly deals on that market in investments of the kind in question.\r\n8. Two kinds of transaction are relevant in this case: the sale of Pace shares,\r\n35 and the placing of spread bets, also on Pace shares. It was common ground that\r\nPace shares are qualifying investments , and that they are (and at the relevant\r\ntime were) traded on a market to which this section applies , namely the London\r\nStock Exchange: see also the Financial Services and Markets Act 2000\r\n(Prescribed Markets and Qualifying Investments) Order 2001 (SI 2001/996),\r\n40 made in accordance with subsection (3). It was further common ground that Mr\r\nParker s sales of shares and, by virtue of subsection (6)(a), his spread betting\r\nconstitute behaviour in relation to qualifying investments and that the\r\nactivities must therefore be judged against the standards laid out in the section.\r\nTaking subsection (1) first, we must consider whether Mr Parker failed to observe\r\n5\r\nthe standards reasonably to be expected of a person in his position and, if so,\r\nwhether in so failing he has offended subsection (1)(c). The essential questions\r\nthen are whether any of the conditions in subsection (2) is satisfied in the event,\r\nonly condition (a) is in issue here and, if so, whether Mr Parker is afforded a\r\n5 defence by either or both of subsections (7) and (8).\r\n9. The basis of the Authority s allegations against Mr Parker is that he acted on\r\n(to paraphrase section 118(2)(a)) relevant information not generally available ,\r\nor RINGA , when dealing in Pace shares or spread betting on them: it contends\r\nthat he knew, from the information which came into his possession in the course\r\n10 of his employment, but which was not generally known or available, that a\r\nsignificant fall in the value of Pace shares was likely, and that he acted on that\r\ninformation for his benefit and to the detriment of other market users. Mr Parker s\r\ncounter-argument is that he did not rely on that information but that in any event\r\nall the information he had was available to anyone who took the trouble to\r\n15 examine and interpret what was in the public domain; alternatively, that it was not\r\nRINGA. Moreover, far from relying and acting on RINGA, he was continuing\r\nwith a strategy on which he had decided before any of the information on which\r\nthe Authority relies came into his possession.\r\n10. We will return to section 118(1)(c), (2)(a) and (7) when we have dealt with\r\n20 the facts. Subsection (8), which is the foundation of Mr Parker s second argument,\r\nleads on to section 119 which, so far as material and as it was in force at the\r\nrelevant time, read:\r\n(1) The Authority must prepare and issue a code containing such provisions as\r\nthe Authority considers will give appropriate guidance to those determining\r\n25 whether or not behaviour amounts to market abuse.\r\n(2) The code may among other things specify\r\n(a) descriptions of behaviour that, in the opinion of the Authority, amount\r\nto market abuse;\r\n(b) descriptions of behaviour that, in the opinion of the Authority, do not\r\n30 amount to market abuse;\r\n(c) factors that, in the opinion of the Authority, are to be taken into\r\naccount in determining whether or not behaviour amounts to market\r\nabuse.\r\n(3) The code may make different provision in relation to persons, cases or\r\n35 circumstances of different descriptions.\r\n(4) The Authority may at any time alter or replace the code.\r\n11. The code MAR 1: The Code of Market Conduct or COMC was duly\r\nproduced by the Authority. The version with which we are concerned was\r\npublished in December 2001. Its effect is prescribed by section 122 of the FSMA:\r\n40 (1) If a person behaves in a way which is described (in the code in force under\r\nsection 119 at the time of the behaviour) as behaviour that, in the Authority s\r\nopinion, does not amount to market abuse that behaviour of his is to be\r\ntaken, for the purposes of this Act, as not amounting to market abuse.\r\n6\r\n(2) Otherwise, the code in force under section 119 at the time when the\r\nparticular behaviour occurs may be relied on so far as it indicates whether or\r\nnot that behaviour should be taken to amount to market abuse.\r\n12. The code itself, at paragraph 1.1.10, makes it clear in our view correctly\r\n5 that this section must be interpreted as meaning that if a particular kind of conduct\r\nis said by the code not to amount, in the Authority s opinion, to market abuse that\r\nopinion is conclusive in favour of a person engaging in that conduct; conduct of\r\nthis kind is known as a safe harbour . By contrast, if the code indicates that any\r\nkind of conduct does, or may, amount to market abuse, or is to be taken into\r\n10 account in determining whether a person has engaged in abusive behaviour, that\r\nindication may be relied on (and is important and persuasive guidance) but it is\r\nnot conclusive against a person whose conduct is under consideration. We will\r\nexamine the relevant parts of the code when we consider Mr Parker s conduct,\r\nafter setting out our findings of fact.\r\n15 The burden and standard of proof\r\n13. A direction was made at an early stage of this reference that we should\r\ndecide, as a preliminary to the other issues which arise, whether an allegation of\r\nmarket abuse requires the Tribunal to determine a criminal charge, within the\r\nmeaning of article 6 of the European Convention on Human Rights, and if so\r\n20 where does the burden of establishing the charge lie, and what is the appropriate\r\nstandard of proof. We can deal with this issue more briefly than might otherwise\r\nhave been the case, partly because it quickly emerged that there was, in reality,\r\nlittle between the parties positions and partly because, since the hearing, the\r\ndecision of the Tribunal in Davidson and Tatham v Financial Services Authority\r\n25 (2006, Decision 031) has been published. That decision deals with the same issue\r\nin detail, and there is no need for us to go over the same ground: we agree with\r\nthe Tribunal s conclusions and for the same reasons. (The issue was also\r\nconsidered, though in less detail, in Legal and General Assurance Society Ltd v\r\nFSA (2005, Decision 015) and in Arif Mohammed v FSA (2005, Decision 012)\r\n30 where the Tribunal adopted a sliding scale approach to the standard of proof.)\r\nHowever, there is a direction that we determine the issue and we think too we\r\nshould deal with some matters argued before us which do not seem to have been\r\nraised in Davidson and Tatham.\r\n14. Neither the FSMA nor the Financial Services and Markets Tribunal Rules\r\n35 2001 (SI 2001/2476) say anything about either the burden or the standard of proof\r\nbefore this Tribunal. However, for the Authority Mr Dutton accepted from the\r\noutset that the burden of proof lay on it. In any case in which a penalty has been\r\nimposed, apart perhaps from a minor penalty occasioned by a technical regulatory\r\nbreach and with no suggestion of moral turpitude, that must be right, regardless of\r\n40 article 6.2 of the European Convention on Human Rights (which provides that\r\nanyone charged with a criminal offence is to be presumed innocent until proved\r\nguilty). So far as we are aware there is no authority which suggests the contrary.\r\n15. Mr Dutton did not, however, concede that an allegation of market abuse\r\ndoes give rise to a criminal charge within the meaning of article 6: he maintained\r\n45 that such an allegation is civil in nature. The significance of the distinction\r\n7\r\nbetween civil and criminal proceedings lies in its impact or possible impact\r\nupon the standard of proof.\r\n16. Mr Parker argued that we should apply the criminal standard; that is, we\r\nmust determine the reference in his favour unless we are satisfied beyond\r\nreasonable doubt of his guilt. He pointed out that the 5 Authority could have\r\nprosecuted him; it had decided against a prosecution not because there is any\r\ndifference in what it must prove in a factual sense in a criminal court and before\r\nthis Tribunal, but because of its perception of his supposed wrongdoing at least,\r\nassuming it followed its own guidance, as that is set out in its Handbook at ENF\r\n10 15.7.2. The criteria identified there indicate that the more serious the offence, the\r\nmore likely it is that a prosecution will be brought. The Authority had decided not\r\nto prosecute but nevertheless maintained as Mr Dutton s skeleton argument\r\nitself made clear that this was a serious offence, justifying a high penalty. The\r\nAuthority could not, he said, have it both ways, by seeking to emphasise the\r\n15 gravity of his supposed offence while contending that it need establish his guilt\r\nonly to the lower, civil standard. There is some obvious merit in that argument.\r\n17. While he acknowledged the force of the decision of the Court of Appeal in\r\nHan and others v Customs and Excise Commissioners [2001] 1 WLR 2253, on\r\nwhich the Tribunal laid much emphasis in Davidson and Tatham, Mr Dutton\r\n20 relied on the later case, also Court of Appeal authority, of Fleurose v The\r\nSecurities and Futures Authority Ltd [2001] EWCA Civ 2015 which, he said, was\r\nmore closely in point. The case does not seem to have been cited to the Tribunal\r\nin Davidson and Tatham and we should deal with it in deference to Mr Dutton s\r\narguments. Mr Fleurose was a registered person subject to the jurisdiction of the\r\n25 Disciplinary Tribunal and Disciplinary Appeals Tribunal of the SFA. The SFA s\r\nresponsibilities have since been assumed by the Authority, and the Disciplinary\r\nTribunal and the Disciplinary Appeals Tribunal, in broad functional terms\r\nalthough the analogy is not exact, find their equivalents in the RDC and in this\r\nTribunal respectively. Mr Fleurose was suspended from acting as a registered\r\n30 person for two years and ordered to contribute £175,000 towards the SFA s costs\r\nbecause of his improper conduct as a trader in manipulating the FTSE 100 Index.\r\n18. In Fleurose, Schiemann LJ, giving the judgment of the court, quoted\r\nextensively from the judgment of Potter LJ in Han and others, mentioning in\r\nparticular the three criteria he had extracted from the jurisprudence of the\r\n35 European Court of Human Rights. These are the categorisation of the allegation in\r\ndomestic law, whether the offence is one which can be committed by any member\r\nof the public or only by a member of a closed group, and the nature of the penalty\r\nwhich may be imposed. The categorisation of conduct by domestic law as a civil\r\noffence only is not decisive. An offence which can be committed by anyone is\r\n40 more likely to be properly regarded as criminal than is one which can be\r\ncommitted only by a member of a closed group, particularly so if the group\r\nconsists of persons who have consented to place themselves within a disciplinary\r\nregime. If a punitive and deterrent penalty can be imposed (even if imprisonment\r\nand the acquisition of a criminal record are not possible) the offence is likely to be\r\n45 regarded, for Convention purposes, as criminal in character. Although the court s\r\nreasoning is rather briefly set out, it appears that the facts that only a registered\r\nperson was subject to the disciplinary authority of the tribunals, and that no\r\n8\r\npunitive or deterrent penalty was imposed that is, the application of the second\r\nand third of Potter LJ s criteria led it to the conclusion that the offence in\r\nFleurose was not criminal in character. A similar view has prevailed in other\r\ncases relating to disciplinary tribunals: see Pine v Law Society [2001] EWCA Civ\r\n1574 (where it was accepted without argument that the Solicitors 5 Disciplinary\r\nTribunal exercises a civil jurisdiction) and Rayner and Townsend v FSA (2004,\r\nDecision 009), a decision of this Tribunal.\r\n19. Mr Dutton s second point related to the rules relating to the evidence which\r\nthis Tribunal may admit when considering an allegation of market abuse. They are\r\n10 to be found in section 133(3) of the FSMA and in rule 19(3) of the Financial\r\nServices and Markets Tribunal Rules 2001. The former permits the Tribunal to\r\nconsider any evidence , and the latter provides that [e]vidence may be admitted\r\nwhether or not it would be admissible in a court of law . Those provisions,\r\nMr Dutton argued, applied whatever the nature of the subject-matter of a\r\n15 reference there was no special evidential rule in a penalty case and were\r\nconsistent only with the classification of the proceedings as civil.\r\n20. Here, in our view, the analogy with the disciplinary tribunal cases is weak,\r\nand Mr Parker s position is much closer to that of the appellants in Han and\r\nothers. In that case and here the conduct in question, if proved, may lead to the\r\n20 imposition only of a civil penalty but, as Mr Parker correctly pointed out, may\r\nalso expose the person to criminal prosecution (in the instant case, by reason of\r\nthe FSMA section 402(1)(a) and the Criminal Justice Act 1993, section 52). One\r\ndoes not need to be a member of a closed group to become subject to a penalty;\r\nMr Parker is not and, as far as we know, never has been an approved person who\r\n25 has voluntarily chosen to be regulated by the Authority or any of its predecessors.\r\nHis being an approved person is not a factor relevant to the liability itself\r\n(although there may be circumstances in which the fact that the person concerned\r\nis approved will be relevant to the standard of behaviour reasonably to be\r\nexpected of him, and it would almost always be a relevant factor in the\r\n30 determination of the amount of any penalty). The penalty imposed on Mr Parker is\r\nboth punitive and deterrent in character, and (as the Authority itself makes clear)\r\nis intended so to be. For those reasons we agree with the Tribunal in Davidson\r\nand Tatham that an allegation of market abuse, even when punished in accordance\r\nwith section 123 of FSMA and therefore by a route which is classed as civil for\r\n35 domestic law purposes, has to be treated, for Convention purposes, as a criminal\r\ncharge.\r\n21. Quite what the standard of proof in cases of this kind should be has been the\r\nmatter of some debate, even before the coming into force of the Human Rights\r\nAct 1998 and the incorporation of article 6 of the Convention into domestic law.\r\n40 We do not, however, need to dwell on the point since, as the hearing proceeded, it\r\nbecame clear that each party was, in fact, content with the approach which, as we\r\nnow know, was adopted by the Tribunal in Davidson and Tatham. That is that\r\nalthough the standard is properly described as the balance of probability, the\r\nconcept requires some refinement in its application. As Lord Nicholls put it in Re\r\n45 H [1996] 1 All ER 1 at pp 16-17:\r\nWhere the matters in issue are facts the standard of proof required in non-criminal\r\nproceedings is the preponderance of probability, usually referred to as the balance\r\n9\r\nof probability. This is the established general principle The balance of\r\nprobability standard means that a court is satisfied an event occurred if the court\r\nconsiders that, on the evidence, the occurrence of the event was more likely than\r\nnot. When assessing the probabilities the court will have in mind as a factor, to\r\nwhatever extent is appropriate in the particular case, that 5 the more serious the\r\nallegation the less likely it is that the event occurred and, hence, the stronger should\r\nbe the evidence before the court concludes that the allegation is established on the\r\nbalance of probability. Fraud is usually less likely than negligence Built into\r\nthe preponderance of probability standard is a generous degree of flexibility in\r\n10 respect of the seriousness of the allegation.\r\nAlthough the result is much the same, this does not mean that where a serious\r\nallegation is in issue the standard of proof required is higher. It means only that the\r\ninherent probability or improbability of an event is itself a matter to be taken into\r\naccount when weighing the probabilities and deciding whether, on balance, the\r\n15 event occurred. The more improbable the event, the stronger must be the evidence\r\nthat it did occur before, on the balance of probability, its occurrence will be\r\nestablished. Ungoed-Thomas J expressed this neatly in Re Dellow s Will Trusts,\r\nLloyds Bank Ltd v Institute of Cancer Research [1964] 1 WLR 451 at 455:\r\nThe more serious the allegation, the more cogent is the evidence\r\n20 required to overcome the unlikelihood of what is alleged and thus to\r\nprove it.\r\n22. As the Tribunal explained in Davidson and Tatham, the fact that conduct of\r\na particular kind exposes the person committing it to what is regarded, for\r\nConvention purposes, as a criminal charge even though its classification in\r\n25 domestic law may be civil does not lead to the conclusion that the standard of\r\nproof must be the domestic criminal standard. Article 6 of the Convention\r\nbestows various rights and protections on an accused person; the requirement that\r\nthe prosecuting authority establish the charge beyond reasonable doubt is not\r\namong them. The standard of proof is, therefore, not dictated by the Convention\r\n30 and one can look only to the domestic law.\r\n23. However, there can be no doubt, in our view, that an allegation that an\r\nindividual has been guilty of conduct for which he should be punished by the\r\nimposition of a penalty of £300,000 is a very grave charge. As Re H shows,\r\ncompelling evidence must be adduced if it is to be established. Put another way, if\r\n35 one applies the sliding scale suggested in Arif Mohammed, the slide must be\r\nvery close to the upper end of the scale. In a practical sense, even if not\r\nsemantically, it is difficult to draw a meaningful distinction between the standard\r\nwe must apply and the criminal standard.\r\nReference to the Tribunal\r\n40 24. We should also mention, briefly, the function and powers of this Tribunal.\r\nWe do not exercise a merely supervisory jurisdiction, deciding whether the\r\nAuthority could reasonably have adopted the course it did. We have an entirely\r\noriginal jurisdiction, to be exercised on the evidence available to us (whether or\r\nnot it was available to the Authority). The Authority must, if it is to succeed,\r\n45 satisfy us that Mr Parker was guilty of market abuse (and it must do so in respect\r\nof each of his relevant acts and omissions). If we are so satisfied in respect of any\r\none or more of his acts and omissions, we must determine for ourselves what is\r\n10\r\nthe appropriate penalty or whether, instead, a statement should be published, or\r\nno action at all should be taken. In determining the amount of any penalty which\r\nmay be appropriate, we are not bound by the Authority s own practice (which we\r\nmay, if we see fit, recommend it to change), still less its approach in this case, but,\r\nin the interests of consistency and fairness, we must respect 5 the statement of\r\npolicy published in accordance with section 124 of the FSMA and take account of\r\nthe penalties imposed in comparable cases. We take those propositions from what\r\nhas gone before in this decision, and from sections 123(3) and 133(3) to (5) and\r\n(8) of the FSMA. We shall return to these principles later in this decision.\r\n10 The facts\r\nPace and its business\r\n25. Pace grew rapidly in the years immediately preceding the period with which\r\nwe are concerned. Mr Parker joined it in 1992, as its financial accountant. It was\r\nformed as a private company in 1982 but in 1996 it was admitted to listing on the\r\n15 London Stock Exchange, and it remains so listed. Its business was the\r\nmanufacture and sale of what are commonly known as set-top boxes, that is\r\ndevices which are capable of accepting a digital television signal and converting it\r\ninto a form which can be interpreted by an analogue television set, video recorder\r\nor similar device, or which act as the interface between a cable or satellite signal\r\n20 and a householder s television apparatus. At first, its products were manufactured\r\nin the United Kingdom but, we understand, by 2001 most, if not all, of its\r\nproduction took place overseas. Its administrative headquarters remained,\r\nhowever, in Saltaire, West Yorkshire, where Mr Parker and the other Pace\r\nemployees who gave evidence were based.\r\n25 26. At the time with which we are concerned, Pace had a non-executive\r\nchairman, three executive directors the chief executive officer, Malcolm Miller,\r\nthe group finance director, John Dyson, and one other and five non-executive\r\ndirectors. Mr Dixon was not a director but, as company secretary, he attended all\r\nboard meetings.\r\n30 27. Pace had an unusual accounting year, from 3 June in one year to 2 June in\r\nthe next. Routine announcements of Pace s results were made six-monthly, after\r\nits annual accounts were prepared and at the half-year stage. The announcements\r\naccompanied the publication of the annual accounts in July of each year and the\r\nhalf-year results in January. The announcements included forecasts of Pace s\r\n35 turnover and profits for the following period. We shall deal in more detail with\r\nannouncements relevant to this decision at a later stage.\r\n28. Pace s customers included cable television companies. At the times with\r\nwhich we are concerned both Telewest and NTL, which between them had almost\r\nall the United Kingdom cable television market, were major customers and in\r\n40 2001 NTL was probably Pace s largest customer by value of sales. Pace also sold\r\nextensively to overseas customers. The typical pattern of Pace s business was that\r\nit would secure a customer, make substantial sales to it for a limited period\r\ntypically up to three years, by which time the customer had saturated its own\r\nmarket when the relationship would end, or continue but only on a much\r\n11\r\nattenuated basis. Although, worldwide, there were comparatively few\r\nmanufacturers of set-top boxes, the market was extremely competitive.\r\nManufacturers had to price their product keenly, and also found it necessary to\r\ngrant extended credit, take equity in the customer rather than immediate payment,\r\n5 or negotiate and grant other concessions to the buyer.\r\n29. It is apparent that the risk that a customer would be unable to pay for goods\r\nsupplied to it was significant, but Pace was able to insure against that risk for most\r\ncustomers with NCM. The cover provided by NCM had an overall monetary limit,\r\nand individual limits for some identified customers, of which, at the material time,\r\n10 NTL was one. Adjustments to the level of cover could be made from time to time,\r\neither by Pace seeking and obtaining a higher limit generally or for a particular\r\ncustomer (and, no doubt, conversely when it lost a customer) and by NCM\r\nreducing the level of cover either generally or in respect of a particular customer.\r\nIt was a term of the policy that Pace should keep NCM informed of the value of\r\n15 its outstanding debtors at any time, and of defaults in payment by individual\r\ndebtors. Pace was also restricted in the period of credit it could grant to its\r\ncustomers if its sales were to be covered by the policy, though it could if it wished\r\ntrade with a customer without the benefit of insurance.\r\n30. NCM also had the right to withdraw cover altogether in respect of an\r\n20 identified customer, but it could not reduce or withdraw cover in respect of sales\r\nwhich had already been made within the terms of the policy. Pace could continue\r\nto make sales to a customer in respect of whom cover had been withdrawn (or\r\nabove the monetary limit which NCM was willing to grant or otherwise outside\r\nthe terms of the policy), but it did so at its own risk. The insurance policy\r\n25 provided that payments received from the customer should be applied first in\r\nreducing the customer s indebtedness in respect of insured supplies, and only\r\nwhen that indebtedness had been fully discharged could payments be applied to\r\nthe uninsured debt. Thus if cover was withdrawn in relation to an individual\r\ncustomer but Pace continued to make sales to that customer it could not\r\n30 earmark payments to the later sales, but bore an increasing risk of bad debt.\r\nMr Parker s position within Pace\r\n31. In 1996, Mr Williams joined Pace as its financial controller and, we\r\nunderstand, at about the same time Mr Parker became responsible for the credit\r\nrisk and treasury department (although he liked to style himself group treasurer),\r\n35 reporting to Mr Williams, who in turn reported to Mr Dyson. Mr Parker s\r\nresponsibilities included the management of Pace s credit risks, including its\r\nrelations with its trade credit insurers, NCM. He handled relations with NCM\r\nhimself, although occasionally there was contact with NCM by Pace personnel\r\nsenior to Mr Parker. Additionally, he handled Pace s exposure to foreign\r\n40 exchange movements, and developed a hedging and advance currency purchase\r\nstrategy designed to reduce the risks to Pace of adverse currency movements. He\r\nwas also responsible for the collection of outstanding debts from Pace s\r\ncustomers, although that task was generally undertaken by a team of five credit\r\ncontrollers, of whom the senior was Mrs Roberts. Day-to-day contact with\r\n45 customers relating to their outstanding debts was dealt with by Mrs Roberts and\r\nher team, but Mr Parker was expected to, and did, become involved in the case of\r\n12\r\nmajor customers or where the amount of the outstanding debt was substantial.\r\nNTL fell into the latter category, on both counts.\r\n32. It was apparent from the evidence that Mr Parker was well thought of within\r\nPace and that his abilities were respected. He had frequent contact with Mr\r\nWilliams and could, and did, make direct approaches 5 to Mr Dixon and Mr Dyson\r\nwhen it was appropriate to do so. Mr Parker told us that he believed that Mr\r\nWilliams felt some animosity towards him, because of a somewhat distasteful task\r\nMr Parker had undertaken, as equality officer, several years ago and because of\r\nwhat he perceived to be a critical appraisal. The former incident did not reflect on\r\n10 Mr Williams in any way and we did not understand why it should have been the\r\ncause of any animosity on his part against Mr Parker. We have considered Mr\r\nWilliams appraisal of Mr Parker. There is one comment in it which might be\r\ntaken as critical (though in our view Mr Parker was unduly sensitive about it) but\r\noverall it is in approving terms. We also did not detect any animosity towards Mr\r\n15 Parker as Mr Williams gave his evidence; on the contrary, he was complimentary\r\nabout him. It is clear that Mr Williams and Mr Parker had no more than a business\r\nrelationship but we do not accept Mr Parker s suggestion that Mr Williams\r\nevidence was coloured by reason of any supposed antipathy.\r\n33. At the time with which we are concerned, Mr Parker s basic salary was\r\n20 approximately £50,000 per annum, in addition to which he had various fringe\r\nbenefits, including the share options to which we come in the next section of the\r\ndecision. Although, as we shall later explain more fully, we heard little evidence\r\nabout Mr Parker s means, it appears from such information as was made available\r\nto us, including Mr Parker s replies to the Authority s investigators in the course\r\n25 of his interviews, that at the relevant time he was in comfortable circumstances,\r\nfrom a financial point of view, and well able to afford to spread bet in the manner\r\nwe shall later describe.\r\n34. Mr Parker s work gave him access to unpublished information about Pace s\r\nfinancial standing, although he had direct access only to records relating to its\r\n30 outstanding debts. Some information about pending and prospective sales was\r\nmade available to him because of his duties; he needed such information in order\r\nto negotiate the levels of credit risk insurance Pace obtained from NCM, in order\r\nto arrange any currency hedging which might be necessary and in order to make\r\ncash flow forecasts. That information, however, was provided in quite general\r\n35 terms, and Mr Parker was more intimately concerned with sales which had\r\nalready been made, and the collection of payment for those sales.\r\n35. Monthly management reports referred to as F1 , F2 and so on, F\r\nrepresenting forecast and the number the month of Pace s accounting year were\r\nprepared by Mr Bown. As one might expect, the reports gave details of Pace s\r\n40 performance during the year to date, with forecasts of its likely performance\r\nduring the rest of the year and the following year, and with comparative figures\r\nfor the previous year. It was clear from the evidence that they were considered to\r\nbe important by Mr Dyson and the remainder of the board and that they involved\r\na great deal of work by Mr Bown. As soon as one report had been presented to the\r\n45 board, he began to prepare the next. Although he was responsible for producing\r\nthe monthly reports, contributions were made by Mr Williams and Mr Dyson,\r\n13\r\nboth of whom often suggested amendments before the reports were presented at\r\nthe monthly board meetings. Mr Parker might sometimes contribute to the reports\r\nby providing information about outstanding debtors and cash flow to Mr Bown,\r\nbut he did not do so on every occasion, and only when asked, and he played no\r\npart in producing the reports themselves. Copies were not 5 routinely supplied to\r\nhim. We were told that he would have been provided with copies if he had asked,\r\nbut it was evidently not expected that he would ask for them without good reason,\r\nand in practice he did not do so. He could not see them by interrogating Pace s\r\ncomputer system as they were kept in a section to which he had no access.\r\n10 36. There is, however, no doubt that Mr Parker was aware, in general terms, of\r\nthe content of the forecasts since he discussed them with Mr Bown who, Mr\r\nParker told us, readily volunteered his opinion about them. He told Mr Parker that\r\nthe forecasts within the F9 report he had prepared in February 2002 were\r\ndisastrous , or catastrophic (both adjectives seem to have been used at\r\n15 different times). But, Mr Parker said, Mr Bown had habitually spoken in such\r\nterms about the forecasts and what he said about F9 did not differ in any\r\nsignificant way from what he had said about other reports during the year. The\r\nimpression we gained from Mr Bown s evidence was that the reports had become\r\nprogressively less good, but F9 was the first which contained forecasts of turnover\r\n20 and profit which the board would be forced to address as they were significantly\r\nbelow those which had been indicated to the market in Pace s earlier public\r\nannouncements (with which we deal at paragraph 62 below).\r\nPace s share option schemes\r\n37. Pace granted share options to certain of its employees. Some options were\r\n25 granted as discretionary, performance-related bonuses; others were available to\r\nemployees generally. The latter were made by means of savings-related share\r\noption schemes which required the employee to save a fixed amount, up to £250\r\nper month, in a save-as-you-earn ( SAYE ) account with Halifax plc for a period\r\nof three years. At the end of the period, the employee could either cash in his\r\n30 savings, to which a pre-determined amount of interest was added, or buy Pace\r\nshares with the accumulated capital and interest at a price which was set at the\r\nmiddle market value on the day preceding the offer of the option, less 20%. An\r\nemployee is permitted (by the general law rather than any rule peculiar to Pace) to\r\ncontribute to only one such savings scheme at any time; likewise it is the law\r\n35 which restricts the discount to 20% and the maximum monthly payment to £250.\r\nAn SAYE option has to be exercised during the six months beginning at the\r\nexpiry of the three-year savings term. We understood that employees granted\r\ndiscretionary options were usually able to exercise them between three and ten\r\nyears from the date of the grant.\r\n40 38. Mr Parker had been granted discretionary options on several occasions, and\r\nhe also took up his right to SAYE options on most of the occasions when they\r\nwere offered he told us that in his early days at Pace he had insufficient spare\r\nmoney but latterly he had taken his maximum possible entitlement. Those options\r\nrelevant here are as follows:\r\n45 On 24 September 1998 Mr Parker was granted a discretionary option\r\nto buy up to 20,000 shares at 64p each;\r\n14\r\nOn 1 April 1999 he took up the right to save for options to buy 11,532\r\nshares at 84p each;\r\nOn 7 July 1999 he was granted a discretionary option to buy up to\r\n10,000 shares at 200p each;\r\nOn 24 July 2001 he was granted a further discretionary 5 option to buy\r\nup to 5,000 shares at 375p each; and\r\nOn 30 January 2002 he took up the right to save for options to buy\r\n3531 shares at 269p each. The first payment would be made in April\r\n2002, after the option taken up in April 1999 matured.\r\n10 39. The discounted price of 269p in respect of the last of those options reflected\r\na market value of Pace shares on 29 January 2002 of 336p. Historically, the price\r\nof Pace shares had been very volatile, a fact reflected in the wide variations in the\r\nexercise price of the different options. Between mid-2000 and early 2002, the\r\nshares reached a high point of about 1250p and a low point of about 200p, with\r\n15 several peaks and troughs in between, and large differences between those peaks\r\nand troughs. The volatility was due in part to the market sector the so-called hitech\r\nsector in which Pace traded, which had been particularly susceptible to the\r\ndot com phenomenon, in part to its own changes of fortune, and in part to its\r\nrelatively small size, which had the consequence that dealings in its shares, which\r\n20 were comparatively infrequent, affected their price to a greater extent than would\r\nbe so in the case of a larger company. That volatility was a fact of which Mr\r\nParker was very well aware (he emphasised it himself) and which as was not\r\ndisputed affected his behaviour. As it happens, the price of Pace shares was\r\nrelatively stable during the early weeks of 2002 but on 5 March 2002, the day on\r\n25 which the profit warning to which we have referred was published, the price\r\nopened at 304p, but fell immediately to about 100p, where it stood at the close of\r\nthe market. We were provided with details of Pace s share price from 5 March to\r\n31 May 2002 which show that the price did not recover during that period. There\r\nwas also no significant fall on 5 March 2002 in the price of shares generally, or of\r\n30 shares in companies in Pace s market sector.\r\nPace s relations with NTL and NCM\r\n40. In 2001 and 2002, it was common knowledge that NTL was in acute\r\nfinancial difficulty. Although most of its business was conducted in the United\r\nKingdom, it had an American parent. There were persistent rumours that the\r\n35 parent would enter into Chapter 11 bankruptcy protection in the United States (as\r\nin fact happened), and that the UK subsidiary would itself seek similar shelter\r\nfrom its creditors. We were provided with copies of several press reports some\r\nbut not all in the financial sector demonstrating that NTL s debt burden and its\r\nefforts to trade itself away from possible insolvency were matters of continuing\r\n40 general interest and concern. Pace s dependence on NTL, as a major customer,\r\nwas also well-known.\r\n41. Despite NTL s financial difficulties of which Pace was of course well\r\naware Pace agreed in October 2001 to sell 450,000 set-top boxes to NTL, for\r\ndelivery in equal quantities in January, February and March 2002. The boxes were\r\n45 intended to enable NTL to convert its remaining analogue customers to digital.\r\n15\r\nThis was at that time the largest single order Pace had ever received and its total\r\nvalue was correspondingly large (in the region of £75 million excluding VAT).\r\nHitherto NTL had been allowed 30-day credit terms but, partly because of the size\r\nof the order and partly because it believed it was being unfairly treated by\r\ncomparison with Pace s other customers, it demanded initially 5 90-day, and then\r\n120-day, terms. At this time, Pace s policy with NCM had an overall limit of £70\r\nmillion, of which a specific counterparty limit of £45 million was attributed to\r\nNTL. The policy itself limited the credit period to 30 days. Mr Parker, as Pace s\r\nlink with NCM, asked for an increase in the limit in respect of supplies to NTL to\r\n10 £75 million, with a corresponding increase in the overall total, and for an\r\nextension of the permitted credit period to 120 days. NCM, however, was already\r\nconcerned about NTL s worsening financial position and its ability to pay, and\r\nwas closely monitoring NTL s payment pattern. Pace s request for more generous\r\nterms was refused and, in fact, NCM (as the policy permitted) imposed more\r\n15 stringent conditions so far as Pace s future sales to NTL were concerned. Despite\r\nthe refusal of an increase in the insurance cover, Pace agreed in December 2001 to\r\nsupply the boxes on 120-day credit terms (without informing NCM that it had\r\ndone so, which was a breach of the terms of the policy).\r\n42. The order for 450,000 boxes to be manufactured, supplied and paid for (as\r\n20 Pace originally assumed) in its current financial year was obviously good news,\r\nbut events turned out rather differently. First, NTL had a change of mind, and in\r\nlate 2001 it reduced its order to 300,000 boxes (with a value of about £50 million\r\nexcluding VAT). It insisted that the schedule of delivery of the remaining boxes\r\nshould be spread over five rather than the originally agreed three months, and it\r\n25 demanded that its credit terms be extended even further, with payments beginning\r\nin, at the earliest, November 2002 and continuing into 2003. Pace agreed to the\r\nreduction in the quantity (it appears that NTL had a contractual right to demand a\r\nreduction to that extent; it had originally attempted to cancel two thirds of the\r\norder but Pace refused to agree) and, albeit with obvious reluctance, Pace\r\n30 conceded NTL s demand that deliveries be deferred, though there was no\r\nimmediate agreement about the scale of the deferment. The question of extended\r\ncredit was to be the subject of prolonged negotiation, to which we shall return\r\nshortly. By this time, Pace had entered into obligations of its own for the buying\r\nin of components, and production had been scheduled.\r\n35 43. At about the same time, that is the autumn of 2001, NTL s pattern of\r\npayments to Pace in respect of invoices rendered for goods already ordered and\r\ndelivered deteriorated markedly. Payments were made late, for sums less than the\r\namount due, and in some cases not at all. NTL demanded extensions of previously\r\nagreed credit terms; but even when they were conceded, it did not honour the\r\n40 renegotiated terms. In mid-February 2002 NTL made a number of complaints\r\nabout the quality of the products and about Pace s after-sales service. It became\r\nclear to us from the evidence that, while the complaints were not entirely\r\nspurious, they were not made for their own sake but were designed primarily as a\r\nmeans of buying time, although they were also used as a means of driving down\r\n45 the price which Pace could charge for boxes it might sell to NTL in the future\r\n(NTL was at this time also in negotiations with other potential suppliers).\r\n16\r\n44. Mr Parker was closely involved in Pace s discussions with NTL about the\r\noutstanding (and increasing) debt, although some of the negotiation was carried\r\nout by Mr Williams or Mr Dyson. Mr Parker monitored the debt continually and\r\nwas in contact with NTL on a daily, or almost daily, basis, putting constant\r\npressure on NTL to make the payments which were due or, 5 more often, overdue.\r\nThe principal negotiator for NTL was Mr West, whose evidence made it clear that\r\nhis role was to drive as hard a bargain as possible. His aim was to secure an\r\nadequate supply of boxes for NTL s continuing needs, in order that it could\r\ncontinue servicing its own customers, while deferring payment to Pace (and, we\r\n10 deduce, its other suppliers) for as long as possible, with the aim of conserving its\r\nliquidity and protecting itself from insolvency.\r\n45. Pace s own position was difficult. It could not afford to jeopardise its\r\ncontinuing relationship with NTL, at least at this stage. NTL was its largest\r\ncustomer, and Pace s sales to it represented a significant proportion of its\r\n15 projected turnover. Its forecasts, of both turnover and profit, for its current\r\nfinancial year were dependent on its sales to NTL, including those originally\r\nagreed in October and later reduced; we shall come to Pace s profit forecasts and\r\nwarnings in due course. Boxes Pace had manufactured for NTL but had not yet\r\ndelivered could not be readily sold to another customer as they were designed\r\n20 specifically for NTL. They could be reworked for sale elsewhere so would not be\r\nentirely lost if NTL cancelled the order altogether, or Pace were obliged to\r\nexercise its retention of title clause, but reworking would entail a cost which\r\nwould be irrecoverable. Pace s advance purchases of components, too, assumed\r\nmanufacture of boxes specific to NTL s requirements.\r\n25 46. During the autumn of 2001 Mr Parker kept NCM informed about the\r\ndeterioration in NTL s debt to Pace, as the policy conditions required. NCM\r\nbecame increasingly concerned, and monitored the level of debt ever more\r\nclosely. It was clear from the evidence of the NCM personnel we heard that Pace\r\nwas regarded by NCM as an important insured customer and that NCM\r\n30 recognised the problems which withdrawal of insurance cover would cause for\r\nPace, but NCM had to consider its own exposure first. Considerable efforts were\r\nmade by NCM to accommodate NTL s debt within the policy, but after several\r\nindications of its increasing anxiety, on 19 December 2001 NCM withdrew cover\r\nin respect of Pace s future sales to NTL. Sales in respect of which invoices had\r\n35 been properly rendered before 19 December 2001 remained insured, but any sales\r\nwhich Pace decided to make to NTL in the future including those which\r\nsatisfied existing orders were not covered by insurance.\r\n47. Negotiations between Pace, NTL and NCM continued after the withdrawal\r\nof cover in December 2001. Contrary to its usual practice NCM, with Pace s\r\n40 encouragement, made a direct approach to NTL, but it was initially rebuffed:\r\nNTL s attitude was that its trade credit insurance was Pace s concern alone. NTL\r\nthen relented and entered into a dialogue with NCM as well as Pace, but its\r\npromises of payment were still frequently dishonoured, in whole or in part, and\r\nthe insured debt reduced more slowly than NCM expected, while the uninsured\r\n45 debt continued to mount. NCM s anxiety grew and on 20 February 2002 it wrote\r\nto Pace, requesting it to instruct its solicitors to inform NTL that if all the\r\noutstanding, overdue debt was not paid within the next 24 hours, Pace would\r\n17\r\npetition for NTL s winding up. It was apparent from Mr West s evidence that he\r\ndid not take the threat of a winding up petition seriously he regarded it as no\r\nmore than a negotiating tactic while NCM was, in fact, in earnest. We heard\r\nfrom Mr Kinloch that the loss which NCM would have suffered had NTL\r\ndefaulted at the time its exposure amounted to £18 5 million would have had a\r\nsignificant impact on NCM s profit.\r\n48. In the event, Pace did not carry out the threat to issue a winding-up\r\npetition Pace s directors were most unwilling to take such action against a major\r\ncustomer, and NTL paid just enough to allow the directors to persuade NCM that\r\n10 it should not force Pace to commence winding-up proceedings.\r\n49. The discussions continued despite the threat of a winding up petition. They\r\ncentred on the redrawing of Pace s retention of title conditions, with a view to\r\nenhancing its protection in a manner which Pace s board believed might persuade\r\nNCM to restore policy cover. It was thought within Pace towards the end of\r\n15 February 2002 that terms had been agreed, in principle, with NTL about the\r\nretention of title condition, delivery of the boxes and payment for them. A letter\r\nprepared by Pace s solicitors and signed by Mr Parker was sent by him to NTL on\r\n28 February 2002 in the hope that NTL would also sign it, but that hope proved to\r\nbe excessively optimistic and final agreement was not reached, we understand,\r\n20 until May 2002. The agreement in principle, if such it was, did not persuade NCM\r\nto restore cover. NTL s poor payment history continued.\r\n50. Mr Parker was, of course, well aware of the level of the outstanding debt.\r\nOn 20 February 2002, he sent an email to Mr Williams and Mr Dyson, pointing\r\nout that Pace was in danger of exceeding its overdraft facilities if it could not rely\r\n25 on regular, timely, payments from NTL and suggesting means by which Pace\r\nmight avoid infringing its banking terms. On the following day, he sent a further\r\nemail recording that NTL then owed £29 million of which £21 million was\r\noverdue; £8 million of the total was uninsured. Though we do not think he would\r\nhave had access to detailed figures, Mr Parker accepted when he gave his\r\n30 evidence that he recognised the likely impact of NTL s failure to pay its\r\noutstanding debts on Pace s turnover and profit for the year. He was aware also of\r\nNCM s request that winding up proceedings should be threatened and he was\r\nunder no illusion about the difficulty of Pace s relationship with NTL.\r\n51. The withdrawal of insurance cover was a serious development from Pace s\r\n35 point of view, although it must be assumed that the directors either did not fully\r\nappreciate its significance, or closed their eyes to it. Their actions and the tenor of\r\ntheir communications with NTL and NCM suggest that they thought, at least until\r\nlate February 2002, that the withdrawal of insurance cover was a temporary\r\nmeasure and that cover would be restored in a short period. Mr Parker, who had\r\n40 dealt with NCM for several years, was evidently not surprised that cover was\r\nwithdrawn in December and realised that its restoration would not be easily\r\nachieved. It was quite clear to us from the evidence we heard from NCM s\r\npersonnel, particularly Mr Kinloch, that he was right. Some time previously Mr\r\nParker and Mr Major had dealt with the possible collapse of a Brazilian customer,\r\n45 when NCM had taken a pragmatic view and, rather than insist upon a strict\r\napplication of the policy condition which required payments to be applied first in\r\n18\r\nthe reduction of insured debt, had agreed that payments should be shared between\r\ninsured and uninsured debt. The outcome was that Pace could continue to make\r\nsupplies with a reasonable expectation of payment and the customer was able to\r\ntrade out of its debt. That experience seems to have led Pace s directors to assume\r\nthat a similar solution could be achieved in respect of 5 NTL s debt, but Mr Parker\r\nwas much less optimistic: he recognised that the Brazilian customer and NTL\r\npresented different problems. He repeatedly conveyed his view that the two\r\nsituations were not comparable and could not be expected to lead to the same\r\nresult to Mr Williams and Mr Dyson, but they effectively ignored him.\r\n10 52. In either September 2001 or January 2002 (we had conflicting evidence\r\nabout the date, though it is not necessary to decide it) Pace began storing\r\nmanufactured boxes destined for NTL but not yet delivered in a warehousing\r\nfacility which enabled it to retain control over the boxes until they were delivered.\r\nSuch was the importance to Pace of maintaining its projected turnover, heavily\r\n15 dependent as it was on its making the forecast sales to NTL, that it started the\r\npractice of generating an invoice for the goods as they were placed into store, and\r\nof recording the invoice in its accounts as if the goods had been delivered to NTL,\r\nbut it did not send the invoices to NTL; again, we had conflicting evidence about\r\nthe date when that practice began. By doing so it was able to give the impression\r\n20 that it was maintaining its sales to NTL. Pace was exposed to the risk that NTL\r\nwould not take delivery of the boxes, because of its insolvency or for any other\r\nreason, although it retained control of the boxes which (after reworking) might be\r\nsold elsewhere. We should mention that, to his credit, Mr Parker protested, on\r\nseveral occasions and in forceful terms, to Mr Williams and Mr Dyson about the\r\n25 practice of generating and recording invoices for boxes which had not been\r\ndelivered, but his protests were ignored. The practice was not made known to\r\nNCM; Mr Kinloch told us that had he become aware of it at the time, he would\r\nhave regarded it as a material breach of Pace s policy with NCM.\r\nProject Pluto\r\n30 53. During 2001 Pace was engaged in discussions with a much larger American\r\ncompetitor about the possibility that the competitor would make an agreed\r\ntakeover bid. The discussions were suspended in September 2001, because of a\r\ndispute about the value of Pace s shares, but then resumed in early December\r\n2001. Although there were rumours about a possible takeover circulating among\r\n35 Pace employees and, perhaps, in the Saltaire area, it seems that the rumours were\r\nvery vague: it was thought that a takeover was in the offing, but whether by Pace\r\nof another company or vice versa was itself the subject of speculation. The\r\nidentity of the possible purchaser was not generally known (although there seems\r\nto have been some speculation about it too). The various press comments,\r\n40 brokers analyses and other similar contemporaneous documents shown to us\r\nindicate that, while Pace was commonly thought of as the potential target of a\r\ntakeover, this particular possible takeover was not known to the market. It was\r\nknown by those within Pace who were privy to the discussions as Project Pluto.\r\n54. Mr Parker became aware that discussions were in progress in December\r\n45 2001, when Mr Williams asked him to provide information which would be\r\nconsidered by the acquiring company in the course of its due diligence process.\r\n19\r\nMr Williams could not recall, when he gave evidence, how much he told Mr\r\nParker, though it is clear he did not give him a great deal of information.\r\nHowever, although we are sure Mr Parker would not have been able to work out\r\nall the details for himself, we are equally sure that he knew perfectly well why the\r\ninformation Mr Williams had requested was required 5 and, indeed, he did not\r\nsuggest the contrary. Mr Parker was not further involved in Project Pluto but (as\r\nhe accepted) he was aware that the negotiations were continuing into 2002, not\r\nleast because of Mr Williams prolonged and otherwise unexplained absences\r\nfrom the office. He knew too that Pace was the intended target; the information\r\n10 which he provided would not have been necessary had Pace been the acquiring\r\ncompany.\r\nThe events of 26 and 27 February 2002\r\n55. On 26 and 27 February 2002 Pace s directors and most senior employees\r\nthose one rung below board level attended what was described as an away day\r\n15 at a Cheshire hotel. Mr Williams and Mr Dixon were present; Mr Parker was not.\r\nThe away day was a biannual event, fixed some time in advance, and there is no\r\nsignificance for present purposes in the event itself. During the late afternoon or\r\nearly evening of 26 February, a message was received by the board from the\r\ncompany which was considering its acquisition that it did not wish to proceed\r\n20 with the discussions at that time . The message evidently came as an unpleasant\r\nsurprise: a great deal of time and money (particularly in professional fees) had\r\nbeen expended on Project Pluto, on both sides, and there had been, we understand,\r\nconsiderable optimism within Pace s board that it would come to a satisfactory\r\nconclusion. Although the message apparently left open the possibility that\r\n25 negotiations might resume, both Mr Williams and Mr Dixon told us they\r\nconsidered that Project Pluto was dead, and that revival of the discussions was\r\nhighly improbable.\r\n56. On the following morning, Mr Williams made several attempts to speak to\r\nMr Parker by telephone. His evidence was that he succeeded; Mr Parker said he\r\n30 did not, and that he managed only to speak to Mrs Roberts, who habitually\r\nanswered Mr Parker s telephone when he was away from his desk, and left a\r\nmessage with her that he wanted Mr Parker to return the call, which he did not do.\r\nWe spent some time hearing evidence on this topic, and examined Pace s\r\ntelephone logs, which recorded the dates, times and provenance or destination of\r\n35 calls received and made by its staff. The logs were unfortunately not conclusive. It\r\nis not of fundamental importance whether or not Mr Williams managed to speak\r\nto Mr Parker, but it does have a bearing on our conclusions and the issue also goes\r\nto credibility.\r\n57. Mr Williams told us, and Mr Parker accepted, that he was in the habit of\r\n40 speaking to those of Pace s staff who reported to him on a daily, or near-daily,\r\nbasis, in person if he was at Saltaire and by telephone if he was not. There was\r\nnothing unusual, therefore, about his seeking to speak to Mr Parker on the\r\nmorning of 27 February, but he was in any event anxious to ensure that Mr Parker\r\nwas doing all he could to ensure that NTL was making payments to Pace even\r\n45 though, as he agreed, he thought Mr Parker was already doing all that was\r\npossible. He was sure that he had made those remarks to Mr Parker and, during\r\n20\r\nthe course of the conversation, told him that Project Pluto had foundered. Mr\r\nParker simply denied that the conversation took place.\r\n58. There was one other matter of controversy about the conversation, or\r\nalleged conversation, namely whether Mr Williams told Mr Parker that the board\r\nmight soon issue a profit warning. It is pleaded by the Authority 5 in its re-re-reamended\r\nstatement of case that he did, while Mr Parker s case was that no such\r\nindication was given to him, either in the conversation (which of course he denies\r\ntook place) or otherwise. Mr Williams recollection was that he had told Mr\r\nParker that he thought a statement was likely, though it was at that stage no more\r\n10 than his own opinion, and not something which any member of the board had\r\ndiscussed with him. He used his opinion as a means of strengthening Mr Parker s\r\nresolve to collect the outstanding NTL debt. That evidence is consistent with what\r\nhe told the Authority during the course of the investigation, though it is fair to say\r\nthat he had had the opportunity of refreshing his memory from the transcripts of\r\n15 his interviews before he gave his evidence to us.\r\n59. We did not find Mr Williams a wholly satisfactory witness. The practice of\r\nPace s internal invoicing of goods destined for NTL but merely put in store and\r\nhis disregard of Mr Parker s warnings do not reflect well on him, and he gave his\r\nevidence defensively. It is also true, as Mr Parker pointed out, that he did not\r\n20 mention his conversation, or alleged conversation, with Mr Parker to the\r\nAuthority s investigators when he was first interviewed (we were provided with\r\ntranscripts of interviews with most of the witnesses from whom we heard). Mr\r\nWilliams explanation was that he was not asked about it, and that its significance\r\nwas not then apparent to him. We accept that explanation; Mr Williams would\r\n25 not, we think, have recognised that the call was of importance at that time, and\r\ndespite the reservations we have expressed we are satisfied that Mr Williams\r\nevidence about the conversation is reliable. Moreover, if we reject the claim that\r\nMr Williams is motivated by animosity, there is no evident reason why he should\r\ninvent a conversation which did not take place it would not be a cause for\r\n30 criticism that he failed to make contact with Mr Parker and had to leave a message\r\nwith Mrs Roberts. As we shall later explain we have no doubt that Mr Parker has\r\nconcocted a conversation with Mr Dixon which, had it in fact taken place, would\r\nhave favoured his case; here, we are satisfied that he has denied a conversation\r\nwhich harms it. He did not explain why he had been unavailable to take any of Mr\r\n35 Williams calls, nor did he explain why he had not returned them. Absent any\r\nsuch explanation it seems to us much more likely than not that contact was\r\nestablished by Mr Williams. By contrast, and despite the passage of four years\r\nsince the relevant events, Mr Williams gave a cogent and entirely plausible\r\naccount of his attempts to speak to Mr Parker and of the manner in which he\r\n40 finally did so.\r\n60. We have, nevertheless, considered why Mr Parker might deny a\r\nconversation which took place. He volunteered that he knew about the\r\nabandonment of Project Pluto from Mr Bown, to whom he had spoken in the early\r\nafternoon of 27 February. That evidence does not, however, coincide with Mr\r\n45 Bown s own evidence: he had been told by Mr Williams that Project Pluto was\r\nnot to proceed but had, he said, not discussed the matter with Mr Parker as he did\r\nnot know whether Mr Parker was aware of the existence of Project Pluto. Mr\r\n21\r\nParker was already aware of Mr Bown s view that the F9 forecast was very poor\r\neven though, he claimed, he discounted it because Mr Bown was pessimistic\r\nabout every forecast. What he denied was that he knew from Mr Williams that a\r\nprofit warning was imminent (information which Mr Bown, even had he known,\r\nwould almost certainly not have passed on: at least, neither 5 he nor anyone else\r\nsuggested that he might). Although the imminence of a warning may have been no\r\nmore than Mr Williams opinion, it is nevertheless significant that a Pace\r\nemployee of his level was of that view. Mr Parker, as we are satisfied, must have\r\nrealised that Mr Williams would not say such a thing lightly and that, however\r\n10 reluctantly, the board were likely to be obliged to heed his opinion.\r\n61. We have already rejected Mr Parker s suggestion that Mr Williams felt\r\nanimosity towards him; we reject too his assertion that Mr Williams has invented\r\nthe conversation. We also do not think that Mr Williams memory has let him\r\ndown and we accept his recollection of what was said. We are therefore satisfied\r\n15 that by the late morning of 27 February, Mr Parker knew from Mr Williams that\r\nProject Pluto had been abandoned, that there was continuing pressure to collect\r\nNTL s debt, and that a profit warning was a real possibility.\r\nPace s announcements to the market\r\n62. We have already observed that Pace s share price was volatile, in part\r\n20 because of its market sector and in part because of its own performance. As we\r\nmentioned at paragraph 39, the price moved between wide boundaries over a\r\nrelatively short time, and its movement was greater than that of its market sector.\r\nThis was, it seems, due to Pace s dependence on a narrow customer base (and\r\ncorrespondingly on its ability to secure large and regular orders) and upon the\r\n25 variable nature of its turnover and profitability.\r\n63. On 9 July 2001 its annual report and results for the year to 2 June 2001 were\r\npublished. Its turnover, at £524 million, was 55% greater than in the previous\r\nyear, and profit before exceptional items was up by 56% to £43 million. The\r\nforecast for the future set out in the report itself, though lacking detail, was very\r\n30 optimistic. A simultaneous announcement added that growth in the first half of the\r\nyear 2001-2002 was expected to be slower, but that it would pick up in the second\r\nhalf. The annual report included the sentence To offset the impact on Pace that\r\nwould result if a major customer were to fail, the Group maintains a credit\r\ninsurance programme over its customer portfolio .\r\n35 64. At the time of the annual general meeting in September 2001, a further\r\nannouncement was made: it indicated that, while the greater part of the increase\r\nwould occur in the second half, overall growth in the year was expected to\r\nincrease by 10% on the previous year (that is, to about £575 million). Despite the\r\noptimistic tone and rather veiled message of the announcement, it was considered\r\n40 in financial and investment circles to herald a poorer year than that forecast in\r\nJuly and it was taken as a profit warning, even if a fairly mild one.\r\n65. The interim results for the half-year ended 1 December 2001 were published\r\non 8 January 2002. Turnover and profit were shown by the accounts to have\r\nincreased over the corresponding period of the previous year, but the forecast for\r\n45 the remainder of the year was much more cautious: by now, Pace was recording\r\n22\r\ngrowth in the first half, but (because of downward pressure on its selling prices)\r\nforecasting turnover for the whole year comparable to that in the previous year,\r\nwhile still expecting increased profit because of improved margins. Nothing was\r\nsaid about Pace s relations with NTL, nor was it disclosed that NCM had\r\nwithdrawn insurance cover in respect of Pace s future sales 5 to NTL. The forecasts\r\nwere, self-evidently, less optimistic than those made in September, and much less\r\noptimistic than those made in July. Although, again, it was not described as one,\r\nthis announcement too must be regarded as a profit warning.\r\n66. At the same time, Pace s public relations consultants made a presentation to\r\n10 a number of stock broking analysts, and thereafter produced a report of the\r\nanalysts reactions; we were provided with a copy. It was clear from the report\r\nthat the interim results were regarded as disappointing, a fact reflected in an\r\nimmediate fall in the share price, although most of the loss was soon recovered.\r\nThe main cause of the disappointment was reported to be the less than predicted\r\n15 level of Pace s penetration of the American market, though some concern about\r\nits exposure to a slowing United Kingdom market is recorded. The report\r\nmentioned a number of unattributed comments made by the brokers who attended\r\nthe presentation, among which was included The Pace share price is quite\r\nfrankly wrong either 50% one way or the other , a further indication of its\r\n20 volatility. Although Pace s dependence on NTL (and other similar companies) is\r\nmentioned, it is not a central feature of the broker s comments, as they are\r\nrecorded in the report. There is no hint that the brokers were aware that Pace was\r\nengaged in difficult negotiations with NTL, or that NCM had withdrawn cover.\r\n67. We were provided also with copies of two independent analyses of Pace s\r\n25 results, by WestLB and Commerzbank, both prepared and published in January\r\n2002. WestLB s report was cautious (emphasising the likely decline in new UK\r\nsales and Pace s dependence on new US business) but optimistic for the longer\r\nterm. It mentioned the possibility of a further profit warning in the second half of\r\nPace s financial year. The Commerzbank analysis was, superficially, more\r\n30 pessimistic but in fact it too stressed difficulties in the short to medium term while\r\nexpressing the view that Pace s long-term prospects were good. Because of the\r\nshort-term difficulties investors were recommended to sell their shares, though the\r\nview was expressed that a price of 300p was fair. NTL s increasing debt to Pace\r\nwas mentioned, but it was recorded that Pace has stated that almost all of the\r\n35 receivables are insured and only £5m is at risk . The report does not indicate\r\nwhen that claim was made but by 21 January, when the analysis was published, it\r\nwas plainly untrue. Again, it seems clear that at this stage there was no general\r\nawareness of Pace s difficult relations with NTL or of its exposure to the risk of\r\nbad debt.\r\n40 68. Mr Parker referred us to the minutes of meetings of Pace s board and of its\r\naudit committee on 4 January 2002. At the first, there was mention of speculation\r\nabout Pace s relations with NTL (though the nature and extent of the speculation\r\nare not described), and some concern was expressed at the meeting about the\r\nwithdrawal by NCM of insurance cover in respect of future sales to NTL and\r\n45 about NTL s determination to renegotiate the terms on which future sales were to\r\nbe made. The fact that manufactured boxes were being stored in a Pace-controlled\r\nwarehouse was noted, but there would, we think, be no significance to that fact if\r\n23\r\nthe practice of invoicing boxes before delivery had not yet begun (we have\r\nmentioned already the conflicting evidence we heard). The audit committee\r\nmeeting took place immediately after the board meeting. It was attended by\r\nPace s external auditors, and its purpose was to review the interim results for the\r\nperiod to 1 December 2001 before those results were published. 5 Mr Parker drew\r\nour attention to the record in the minutes that at the end of November 2001 the\r\nuninsured debt amounted to £9 million and to the auditors advice that it was\r\nunnecessary to mention this fact in the interim results report.\r\n69. Pace s next board meeting took place on 19 February. We were not\r\n10 provided with a copy of the minutes, nor any other evidence about the topics\r\ndiscussed. A substantive, general, board meeting was held on 26 February, before\r\nthe start of the away day at the Cheshire Hotel. The minutes show that although\r\nthere was concern about the continuing negotiations with NTL, there was\r\noptimism that all of NTL s overdue debts and all its other indebtedness to Pace in\r\n15 respect of sales made before 30 November 2001 would be paid by 30 April (that\r\nis, comfortably before the end of Pace s financial year), and there was no, or at\r\nleast no minuted, discussion of a possible profit warning.\r\n70. Over the next two or three days Mr Miller and Mr Dyson, both of whom\r\nwere evidently closely involved in the discussions with NTL and NCM, came to\r\n20 recognise that the optimism about the payment of NTL s overdue debts expressed\r\nat the board meeting on 26 February was misplaced, and that, far from\r\nconsidering the restoration of cover, NCM was pressing Pace hard to instruct\r\nsolicitors to wind up NTL if the whole amount outstanding was not paid\r\nimmediately. By this time, there was no room for believing that NCM was not in\r\n25 earnest. It was also clear by then that there was no prospect that NTL would clear\r\nits existing debt by the end of April, nor that it would pay for any of the 300,000\r\nboxes by the end of May (as Mr West told us, NTL did not have any means of\r\ndoing so). There was increasing concern about Pace s US sales. Mr Miller and Mr\r\nDyson clearly recognised that Pace s latest turnover and profit forecasts could not\r\n30 be met and that Stock Exchange rules made an announcement, containing a profit\r\nwarning, inescapable. They convened an emergency board meeting, conducted by\r\ntelephone, and secured the agreement of the board to the making of an appropriate\r\nannouncement, in a form agreed between Mr Miller, Mr Dyson and Pace s\r\nprofessional advisers, as soon as possible. (It is conspicuous and surprising that\r\n35 Pace s being close to exhausting its banking facilities, of which Mr Parker had\r\nwarned, is not minuted as having been mentioned at the board meetings on 26\r\nFebruary and 4 March.)\r\n71. At 7.00 am on 5 March 2002, therefore, Pace made the announcement\r\nwhich led to the dramatic fall in its share price. That fall occurred despite the\r\n40 bland and somewhat obscure nature of the announcement. Its main feature was the\r\nforecast that turnover for the year would be around £350 million , which\r\ncompared unfavourably with the £575 million which had been indicated in\r\nSeptember 2001 (that prediction was merely hinted at in the March\r\nannouncement) and with the announcement made in January when the half-year\r\n45 results were published. It was also well below the average of the stockbrokers\r\nexpectations, at about £522 million, which emerged from the presentation made\r\nby the public relations consultants in January. It was suggested in the 5 March\r\n24\r\nannouncement that Pace would still make a profit in the second half of the year,\r\nand the projection for the year 2002-2003 was optimistic. The Annual Report and\r\nAccounts for the year 2001-02 show that Pace s actual turnover for the year was\r\n£352 million, but that it made a loss in the second half of that year: that loss\r\nreduced but did not eliminate the profit declared at the interim 5 stage in January\r\n2002. The March announcement contained the sentence The difficult trading\r\nenvironment has been exacerbated by a reluctance on the part of Pace s trade\r\ncredit insurers to increase their exposure at this time . That sentence can only be\r\nregarded as misleading: as we have already mentioned, NCM had actually\r\n10 withdrawn cover in respect of Pace s largest debtor and Pace was attempting to\r\nhave cover restored, rather than increased. The statement also blamed problems\r\nencountered in developing products for the US market.\r\n72. It is perhaps not surprising that the announcement was not taken at face\r\nvalue by the financial press, and during the course of the same day Mr Miller, as\r\n15 Pace s chief executive, made statements to the press in which rather more of the\r\nbackground to the announcement was revealed. The only point presently relevant\r\nis that it became clear from what he said that Pace s difficult relations with NTL\r\nand NCM s withdrawal of cover (which was now disclosed) had left it in an\r\nexposed position. Indeed, Mr Miller focussed on these factors as the reasons\r\n20 behind the profit warning, rather than the other matters mentioned in the\r\nannouncement. The misleading nature of the announcement made in January\r\n2002, so far as it related to Pace s trade credit insurance, also became apparent.\r\nThe circumstances surrounding the making of the January announcement led to an\r\nenquiry by the Authority into Pace s announcements, and the imposition on it of a\r\n25 penalty; we will make further mention of that penalty later in this decision.\r\nPace s share dealing rules\r\n73. In common with other quoted companies, Pace was required to, and did,\r\nprohibit dealing in its shares by its directors and those of its employees who had,\r\nor might have, access to information which was not publicly available. The\r\n30 prohibition was not complete: there was a blanket prohibition at sensitive times,\r\nessentially the period between the end of a half-year and the publication of the\r\nresults for that half-year (a close period ), and a more selective prohibition at\r\nother times. Relevant employees were required to seek prior permission to deal,\r\neven at times when share dealing was not prohibited. Those employees who were\r\n35 subject to the prohibition and who were required to obtain permission before\r\ndealing were on a restricted list . Mr Parker, because of his access to information\r\nabout Pace s finances, was on the restricted list at all material times.\r\n74. A reminder of the prohibition and of the need to obtain permission was sent\r\nby internal email to all members of the restricted list at appropriate times.\r\n40 Nominally it was sent by Mr Dixon, but in practice it was sent out by his assistant,\r\nusually in his name. By way of example, the email sent to the restricted list in\r\nDecember 2001 was in these terms:\r\nThe purpose of this note is to remind you that the Company has entered a close\r\nperiod for dealing, and as you are covered by the Pace Share Dealing Rules you are\r\n45 restricted from dealing in Pace shares until after publication of the Interim Results\r\nfor the period ended 1 December 2001, which is expected to occur on 8 January\r\n25\r\n2001. You should endeavour to ensure that persons connected to you do not deal\r\nduring this period.\r\nYou are reminded that permission to deal is, in any event, required at all times and\r\nyou must not deal at any time when in possession of unpublished price sensitive\r\ninformation relating 5 to the Company s shares.\r\n75. At the end of the close period, in January 2002, Mr Dixon s assistant sent on\r\nhis behalf a further email in these terms:\r\nThe purpose of this note is to inform you that the Company is no longer in a close\r\nperiod for dealing, and subject to the Pace Share Dealing Rules you are no longer\r\n10 prevented from dealing in Pace shares so long as you do not hold unpublished\r\nrelevant or price sensitive business information relating to Pace.\r\nYou are reminded that permission is deal is, in any event, required at all times and\r\nyou must not deal at any time when in possession of unpublished relevant\r\ninformation relating to the Company s business or shares. When obtaining\r\n15 permission to deal you should state whether you intend to buy or sell and the\r\nmaximum number of shares involved. You should submit requests to deal in\r\nwriting or by e-mail to Anthony Dixon. The Company is required by the listing\r\nrules to keep a record of all individuals seeking permission to deal in Pace shares\r\nand the details of any permission given in writing.\r\n20 Under the terms of the Financial Services and Markets Act 2000, legislation which\r\ncame into effect on 1 December 2001, the Financial Services Authority is\r\nempowered to investigate any matters which it believes may constitute market\r\nabuse and this can include circumstances which involve dealings by employees of\r\nlisted companies when they do not have proper permission to deal. Accordingly,\r\n25 please make every effort to ensure you comply with the requirements of the Pace\r\nShare Dealing Rules.\r\n76. Nominally, permission to deal was given by the board rather than by the\r\ncompany secretary but, except when the person seeking permission was a director\r\nor there was something unusual about the request, Mr Dixon granted (or refused)\r\n30 permission under delegated authority. It was clear to us, not only from his oral\r\nevidence but from the documentation we saw, that Mr Dixon took the share\r\ndealing rules seriously, and they were not applied in a merely formal manner. He\r\ndid not always grant permission when it was requested, and when he did grant it,\r\nhe seems generally to have imposed a time limit. After the expiry of the time limit\r\n35 an employee wishing to deal would need to seek further permission if he had not\r\ndealt within the limit, or wished to deal again; the further permission could not be\r\ntaken for granted. Mr Dixon considered that the exercise of an option to purchase\r\nPace shares that is, an option granted to an employee by Pace itself amounted\r\nto dealing and required permission. Nevertheless, although we are satisfied that\r\n40 Mr Dixon set out to apply the rules carefully, there were some significant lapses,\r\nas for example when Mr Parker successfully applied for permission without\r\nspecifying whether he intended to buy or sell, and without specifying the number\r\nof shares involved, and there was no mechanism, even by spot checks, by which\r\nMr Dixon could determine whether permission had been sought when required, or\r\n45 that the terms of any permission were respected, nor even whether a person on the\r\nrestricted list had dealt during a close period. The system relied on the voluntary\r\ncompliance of those subject to the rules.\r\n26\r\n77. Mr Parker agreed that he was well aware of the restrictions on his ability to\r\ndeal, and had been since long before 2002. He told us that, mindful of the\r\nrestrictions, he asked Mr Dixon whether they extended to his spread betting on\r\nPace shares. He produced a note, in his own handwriting, which purported to\r\nrecord his conversation with Mr Dixon on 27 November 5 2000 when, according to\r\nthe note, Mr Dixon advised him that, as spread betting did not amount to dealing\r\nin the shares themselves, permission was not required. Mr Dixon told us he had no\r\nrecollection of any such conversation but, if Mr Parker had asked him whether\r\npermission was required for spread betting, he would not have given an\r\n10 immediate answer since he would himself have needed to take advice, from the\r\nboard and probably Pace s solicitors.\r\n78. We have no hesitation in preferring Mr Dixon s evidence on this issue. We\r\nare satisfied that Mr Parker has invented the conversation and manufactured the\r\nnote. Mr Dixon s evidence rang true, and we have no doubt, from the tenor of his\r\n15 evidence generally, that he would indeed have sought advice before giving Mr\r\nParker an answer; it was not a field in which he could claim any special\r\nknowledge. It is conspicuous that, although Mr Parker was at the time in frequent\r\nemail contact with both Mr Dixon and his assistant about his share dealings (and\r\nother matters), he did not record by email the advice Mr Dixon had supposedly\r\n20 given him orally, nor did he ask him to confirm that advice. His failure to do so is\r\ndifficult to understand against the background of his having asked Mr Dixon at\r\nother times, by email, for clarification of the share dealing rules. Indeed, he made\r\nanother enquiry about the rules by email on the very same day (27 November\r\n2000) when Mr Dixon advised him, though perhaps a little ambiguously, that a\r\n25 standing instruction to a broker to sell shares if the price dropped to a certain level\r\nmust be suspended during a close period. We observe too that Mr Parker placed\r\nfive of his known spread bets on Pace shares before his alleged conversation with\r\nMr Dixon; the first took place some nine months earlier.\r\n79. Even were we to accept that Mr Parker did think, on reasonable grounds,\r\n30 that he did not need permission to spread bet, and even were we to accept that he\r\nbelieved too that he could spread bet in a close period (and he did not claim to\r\nhave sought advice on that point) it is conspicuous that, on several occasions, he\r\nfailed to seek the permission he accepts he knew he should obtain when buying\r\nand selling Pace shares, and failed to respect the expiry date of permission he was\r\n35 given on one occasion when he did obtain it. Additionally, there were several\r\noccasions on which he dealt in Pace shares in a close period, when he clearly\r\nknew that permission would not be granted if he had sought it.\r\n80. Mr Parker acknowledged that he had no real excuse for his failures. The\r\nexplanation he offered was that he was pursuing a pre-arranged strategy, but even\r\n40 if that is so it cannot justify his failure to comply with straightforward rules of\r\nwhich he was well aware. The text of the emails sent to those on the restricted list\r\nwhich we have set out is typical of those which had been sent on previous\r\noccasions, save that the reference to the FSMA was new. Mr Parker could easily\r\nhave planned his sales and purchases so as to avoid dealing in a close period. He\r\n45 did not suggest that permission might have been refused at other times for any but\r\nproper reasons; indeed, the evidence we heard suggested that, outside close\r\nperiods, permission was not often refused although, as we have indicated, it may\r\n27\r\nhave been granted only for a limited period. One oversight on Mr Parker s part\r\nmight be forgiven; the frequency of his failing to obtain permission, and his\r\nwillingness, repeatedly, to deal in a close period can lead only to the conclusion\r\nthat he deliberately and consciously ignored the rules.\r\n81. We should add Mr Parker s point that, had he asked 5 for permission to sell\r\nhis and his wife s Pace shares at the end of February 2002, the permission would\r\nhave been granted. That may well be right; we are aware that other Pace\r\nemployees on the restricted list (including, it seems, Mr Bown who had probably\r\neven greater access to sensitive information than Mr Parker) were granted\r\n10 permission at that time. The circumstances in which that permission was given\r\nwhich have been the subject of enquiry by the Authority were not explained to\r\nus, and it may be that there are good reasons why other individuals were given\r\npermission to deal. However, if Mr Parker is correct in saying that, had he asked,\r\npermission would have been given, it is all the more difficult to understand why\r\n15 he did not request it.\r\n82. We add parenthetically that it would not, in our view, have been appropriate\r\nto grant permission to deal to Mr Parker had he asked for it on 27 February; nor,\r\nhad he obtained it, ought he to have taken advantage of it in order to deal. As the\r\nextracts from the emails we have set out above correctly state, the obtaining of\r\n20 permission to deal does not give the recipient carte blanche to do so; if his dealing\r\nis to be legitimate he must also satisfy the condition that he is not in possession of\r\nprice-sensitive information. In our view, as we shall explain, Mr Parker plainly\r\nwas in possession of such information. Whether permission should have been\r\ngranted to others, and whether they should have exercised the permission if\r\n25 granted, are not matters on which we are required to adjudicate, and nothing we\r\nsay about Mr Parker should be taken to reflect on those matters, one way or the\r\nother.\r\nMr Parker s investment strategy\r\n83. During the period with which we are concerned, Mr Parker bought and sold\r\n30 Pace shares and placed and adjusted spread bets, also on Pace shares. The two\r\nactivities cannot be considered separately since it is his case that his spread\r\nbetting, or at least some of it, was a means of hedging his holdings of Pace shares\r\nand his unexercised options. We will come to his dealings in Pace shares (we\r\ninclude dealings he conducted in his wife s name: he had her authority to deal in\r\n35 her shares), and the individual spread bets, at a later stage; at this point we\r\nconsider the underlying strategy, as he described it to us.\r\n84. Most, though not all, of Mr Parker s acquisitions of Pace shares derived\r\nfrom the share options which were granted to him. Although, as we have\r\nmentioned, he declined an offer of options early in his career with Pace, more\r\n40 recently his practice was to take up all the options which were offered. He then\r\nexercised the options when they matured, but generally sold the shares he\r\nobtained within a fairly short time. When he bought shares on the open market he\r\nseems usually, if not always, to have held them for no more than a few weeks\r\nbefore selling them. However, while he owned the shares or had in the money\r\n45 options (that is, options to buy shares in the future at a price lower than the\r\npresent-day prevailing market price) he had both the opportunity of making a gain\r\n28\r\nif the price rose and the risk of suffering a loss if it fell. His strategy was to hedge\r\nagainst that possible loss.\r\n85. He explored the possibility of hedging by buying options in the market, or\r\nby entering into contracts for differences, but he decided that both were expensive\r\nand not altogether suitable, and options on Pace shares 5 were also not readily\r\navailable. Spread betting, however, was a comparatively inexpensive means of\r\nhedging, and was easy to access. Mr Parker established contact with IG in May\r\n2000, initially with the intention of entering into contracts for differences, but it\r\nsoon became apparent that IG did not offer contracts for differences with the\r\n10 protection of guaranteed stops, as Mr Parker required, nor suitable options\r\n(though for a short period he did spread bet on options on Pace shares until IG\r\nceased to offer bets on Pace options), and after some further discussions with IG\r\nhe decided to spread bet on Pace shares themselves. He did not claim to confine\r\nhimself to hedging, but additionally created straddle positions (or, as he termed\r\n15 them, synthetic straddles ).\r\n86. It is probably appropriate that we include at this point a brief description of\r\nspread betting. It can be adapted to many situations (it was first used as a means\r\nof betting on sporting events) but we need to deal here only with its application to\r\nshare prices. The intending gambler bets with the spread betting house on a\r\n20 movement in the share price. He may bet that a rise will occur (a long or up\r\nor buy bet the terms are synonymous) or that the price will fall (a short or\r\ndown or sell bet). The spread betting house quotes to him a price for a fixed\r\nfuture date (a strike price) for the share: one price for a long bet, and a lower\r\nprice for a short bet. The difference between the two prices is the spread, hence\r\n25 the term spread betting. The spread is generally larger in the case of a volatile\r\nshare than in the case of a share whose price is more stable. A bet is placed by\r\nreference to each point (or penny) movement in the price, and is measured in\r\npounds per point. A bet of £1 per point (a very small bet) is equivalent to the\r\nownership of 100 shares as a penny movement in the price of a share results in a\r\n30 gain or loss of £1 for the owner of 100 shares, so a £1 spread bet results in a gain\r\nor loss of £1 for each penny of movement in the price of the share on which the\r\nbet has been placed.\r\n87. The principal advantage to the customer of spread betting is that it is\r\npossible to obtain exposure to movements in share prices without the expense of\r\n35 buying and selling the underlying shares. Instead, the spread betting house\r\nrequires a deposit, called margin , from its customer (Mr Parker opened an\r\naccount with IG and made the necessary payments) but the margin required is\r\nmeasured by the possible loss rather than by the cost of the share. There is the\r\nfurther advantage that betting gains do not attract tax (though losses cannot be set\r\n40 off against other income or gains). Additionally, at least at the time with which we\r\nare concerned, the customer might protect himself by placing guaranteed stops on\r\nhis bets, so as to limit his losses. For example, a customer who placed a long bet\r\ncould add a stop at a price below the strike price; if, rather than rise, the price fell\r\nto the stop the bet was automatically closed and his loss did not increase further.\r\n45 Ordinarily a bet lasts for three months (a fixed end date is necessary if the\r\ntransaction is to be regarded as a bet, since an event is required) but it may be\r\nclosed earlier, either by the operation of a stop or because the customer chooses to\r\n29\r\nclose it. A bet may be rolled over at the expiry of the three month period, but\r\nthis has to be done by closing the existing bet (taking any profit or meeting any\r\nloss in which it has resulted) and opening another on identical terms, save for the\r\nexpiry date.\r\n88. We learnt that in 2001 and 2002 the spread betting 5 houses were rather less\r\nsophisticated in their approach to bets on shares than is the case now. Spreads\r\nwere determined less scientifically, and stops were placed at no, or negligible,\r\ncost to the customer even though the spread betting house increased its own level\r\nof risk by its agreeing to place stops that is, the customer s prospect of winning\r\n10 was undiminished while the amount he might lose was restricted and it was more\r\ndifficult for the spread betting house to hedge a bet with a guaranteed stop. At the\r\ntime with which we are concerned, customers such as Mr Parker were allowed by\r\nIG to move stops without cost, a facility of which he availed himself on several\r\noccasions. We were told by IG employees that no fee was charged for the placing\r\n15 of stops for reasons of competition. We understand, too, that guaranteed, absolute,\r\nstops are no longer available from IG. A guaranteed stop at (say) 200p would\r\nprotect a customer even if the share fell from 250p to 150p in one movement; thus\r\nthe spread betting house was offering a guarantee against which it had no means\r\nof protecting itself. Only best endeavours stops, which provide some protection\r\n20 for the spread betting house in the event of sudden market movements of that\r\nkind, are currently offered by IG.\r\n89. Mr Parker s bets placed for hedging purposes were fairly straightforward. In\r\norder to protect the value of shares he held, or in the money options, he bet on a\r\ndownward movement in the share price. By that means, if the share price rose he\r\n25 gained by reason of his underlying holding, though he lost the amount of his\r\nspread betting stake. Conversely, if the share price fell, the value of his underlying\r\nholding fell, but he was protected by the gain he made on his bet. He did not\r\nalways protect himself by placing a stop on his bet; when he began spread betting\r\nhe seems rarely to have placed a stop, but increasingly did so as time passed.\r\n30 90. His straddles, or synthetic straddles as he preferred to call them, consisted of\r\ntwo matching bets, one long and one short. Mr Parker s use of the phrase\r\nsynthetic straddle was explained by the fact that this spread betting technique\r\ndid not exactly replicate a more traditional straddle . Such straddles are effected\r\nby way of the purchase of a put and call option on an asset for the same amount.\r\n35 To the extent that his two spread bets were not matched in size, Mr Parker would\r\nhave an open directional position as well as a synthetic straddle . A straddle bet\r\nwas not placed to hedge a share but in order to benefit from significant movement\r\nin the share price, whether that movement was up or down. By appropriate\r\nplacing of stops Mr Parker believed he could guarantee a profit on one bet,\r\n40 provided there was sufficient movement in the share price in the direction\r\nfavoured by that bet, while limiting the loss to which the same movement would\r\nlead on the other bet. If the movement was large enough he could, irrespective of\r\nthe direction of movement, be certain of a profit provided only that the share price\r\nwas not so volatile that his stops were triggered before the gain was made. It\r\n45 appears, in fact, that Mr Parker took advantage of this means of profiting before\r\nIG had understood his strategy, though there is no suggestion that he was doing\r\nanything improper. Of course, if there was insufficient movement in either\r\n30\r\ndirection, or the price merely moved up and down within narrow limits, he made\r\nno gain and lost the spread between his buy and sell bets. Straddles of the kind\r\neffected by Mr Parker also have the disadvantage that if one of the bets is\r\nautomatically closed by the operation of a stop, the gambler remains exposed to\r\n5 the other and may suffer substantial losses.\r\n91. In rather simplified terms, but sufficient for illustrative purposes, the cost of\r\nplacing a straddle is the spread multiplied by the pounds per point of the bets.\r\nThus, to take one of Mr Parker s straddle bets as an example, a long bet with a\r\nstrike price at 315p and a short bet at 299p gave a spread of 16p; at £250 per point\r\n10 there was a cost of £4000 (16 x £250). In order to win, Mr Parker needed a\r\nmovement in the share price which led to a gain on one leg of the straddle\r\nwhich exceeded the loss, restricted by a stop, on the other by more than £4000.\r\nThe cost is notional: Mr Parker was not required to pay £4,000 to IG (he had\r\ninstead to deposit the requisite margin, although in some cases, particularly if the\r\n15 price of the underlying asset was very volatile, the margin might exceed the\r\nnotional cost) and it may not be equivalent to the loss sustained on an\r\nunsuccessful bet (which would depend on the amount of movement and the\r\nplacing of stops) but it is the amount the gambler must win in order to break even.\r\n92. Mr Warner was instructed by the Authority to prepare a report and give\r\n20 evidence about spread betting, and to express views about Mr Parker s betting\r\nstrategy, particularly whether it could properly be regarded as hedging. We accept\r\nMr Warner, who is currently the chief executive officer of a spread betting house\r\nand who has 20 years experience in the financial services industry, as an expert\r\nin the relevant fields. He agreed that spread betting was an acceptable, even if\r\n25 rather unusual and crude, method of hedging. He was, however, critical of Mr\r\nParker s transactions, which he considered went further than was necessary for a\r\ntrue hedging strategy, and he was also critical of his underlying reasoning. We\r\nthink his criticism was a little harsh in some respects, but sound in others.\r\n93. Mr Parker did not place bets which exactly matched his holdings, but in\r\n30 round numbers, generally higher than his holding. Mr Warner accepted that bets\r\nwould not be placed so as to cover a holding precisely (his report assumes\r\nrounding to the nearest £5, equivalent to 500 shares) but criticised Mr Parker for\r\nhis much coarser rounding, to the nearest £50 or sometimes more. That, he said,\r\nwas not consistent with true hedging. Additionally, Mr Warner considered that Mr\r\n35 Parker could not justify keeping a bet designed to protect an option in place, as a\r\nhedge, once the option had moved out of the money , that is, the market price of\r\nthe share had fallen below the price at which the option could be exercised. At\r\nthat point, he said, there was nothing to hedge since the option ceased to have any\r\nvalue.\r\n40 94. At first sight there is substance in the first of those observations. However,\r\nwe bear in mind that Mr Warner is an experienced professional with ready access\r\nto sophisticated financial tools and information while Mr Parker was an interested\r\namateur (albeit one with experience of hedging his employer s exposure to\r\nforeign currency movements), and one should not be too ready to criticise errors\r\n45 due to inexperience. Nevertheless, while we accept that an investor setting out to\r\nprotect the value of his shares, and no more, would normally aim to match the\r\n31\r\nvalue of his hedge to the shares or options to be protected with rather greater\r\naccuracy than Mr Parker in fact achieved, we are not persuaded that his rather\r\nrough and ready approach, in itself, casts doubt on his claimed motives. We\r\naccept that Mr Parker did, as he claims, seek to hedge the value of his shares and\r\noptions; on the other hand, as will later become apparent, 5 we do not accept that\r\nhis motive for some of his bets was hedging alone.\r\n95. In addition, we are not persuaded that, as Mr Warner s evidence implies, Mr\r\nParker should immediately have closed his hedging bet once an option became out\r\nof the money. First, Pace s share price was volatile, and a drop below the exercise\r\n10 price of an option which was being hedged might easily have been reversed\r\nwithin a short time; the closing of one bet, with the prospect that another might\r\nneed to be opened very soon, could well prove unnecessary and expensive.\r\nSecond though it is perhaps the same point put another way we do not agree\r\nwith Mr Warner that out of the money options have no value at all; there\r\n15 remains a time value which will be larger the longer the option has to run to\r\nexpiry, though smaller the further the market price falls against the option strike\r\nprice. Third, we see no reason why Mr Parker should not legitimately retain a bet\r\nhe had placed as a hedge against an option, even when it ceased to serve that\r\npurpose, in the hope that he might gain by a further fall.\r\n20 96. Mr Parker did not suggest that his synthetic straddles were anything but\r\nspeculative positions, though he did claim that, throughout, they were neutral, in\r\nthat they did not favour either a rise or a fall in the price of Pace shares; he was\r\nseeking no more than a significant movement in one direction or the other. He had\r\nexperimented in order to develop a strategy (and had placed straddles by reference\r\n25 to shares in companies other than Pace although it is apparent that his bets on\r\nother shares were comparatively small) and, like his hedges, his straddle bets were\r\nwhat he described as delta neutral , a term with which Mr Warner was familiar.\r\nAlthough it has a rather more technical meaning, for present purposes it is\r\nsufficient to say that delta neutral , when used in conjunction with a straddle, is\r\n30 roughly equivalent to balanced in relation to the direction of any price\r\nmovement in other words, the gambler expects, or hopes for, a significant\r\nmovement in one direction or the other, but has no preference it is the\r\nmagnitude rather than the direction of the movement which will lead to his\r\nmaking a profit, provided the movement is large enough.\r\n35 97. Mr Parker told us that some of the transactions he effected between 27\r\nFebruary and 4 March 2002 formed part of a pyramid strategy. An investor\r\nconstructing such a strategy progressively adds to and adjust bets as movement\r\noccurs with the intention of increasing his exposure to continuation of that\r\nmovement, while reducing his exposure to a reversal. Mr Warner was, in our view\r\n40 correctly, of the opinion that Mr Parker s actions were not those of an investor\r\nbuilding a pyramid. There was very little movement in the Pace share price\r\nbetween 27 February and 4 March, and such movement as there was did not\r\nindicate that the price was set to move in one direction rather than the other. We\r\nagree with Mr Warner that Mr Parker was doing no more than increasing the\r\n45 amount by which he would gain should the fall in the share price he expected\r\nmaterialise.\r\n32\r\n98. We have no doubt that Mr Parker did have a strategy, though not the\r\nstrategy he claimed. He had read a great deal about options trading, spread betting\r\nand hedging strategies (at the hearing he produced, with several passages marked\r\nfor us to read, a book called Option Volatility and Pricing, by Sheldon Natenberg,\r\none of several he seems to have read) and it is quite obvious 5 he was fascinated,\r\neven obsessed, with the subject. He had also devoted an enormous amount of time\r\nto planning his own bets. As we have said, we do not doubt that the bets he placed\r\nwere, in part, designed to hedge the value of his and his wife s shares and options.\r\nThough we shall comment later about the wisdom of his making them, we accept\r\n10 too, though with some reservations which we shall also explain later, that in the\r\nperiod before 27 February 2002 Mr Parker s straddle bets were designed to profit\r\nfrom significant movements in the price of Pace shares, in whichever direction\r\nthey might be and with no marked preference for either. However, we are equally\r\nsatisfied that Mr Parker was not telling us the truth when he claimed that none of\r\n15 what he did had any other motive. His efforts to persuade us that the new bets he\r\nplaced, and the changes he effected to his existing bets, on or after 27 February\r\n2002 were designed to preserve his delta neutrality and were merely the\r\ncontinuation of his pre-existing strategy as well as his claim that he was building a\r\npyramid strategy were, we are satisfied, due to his desire to provide some\r\n20 justification for his actions. We are quite sure he was attempting to construct a\r\ntechnical explanation of his actions in the hope that we would find it plausible; in\r\nfact we are satisfied it is illusory. We shall return to this topic when we have\r\ndescribed the transactions themselves.\r\nMr Parker s investment advisers\r\n25 99. During the period with which we are concerned Mr Parker was in contact\r\nwith two firms which offered investment advice Redmayne Bentley,\r\nstockbrokers, and BPR Financial Management, an investment and financial\r\nadviser. He conducted all his spread bets through IG, to which we will come in\r\nthe next section of this decision.\r\n30 100. Mr Parker had been a client of Redmayne Bentley for some years when Mr\r\nHooper joined the firm, at its Leeds office, in 1999. Until late 1999, Mr Parker\r\nused Redmayne Bentley s execution-only service, but he then decided to use its\r\nadvisory service, and Mr Hooper became his adviser and point of contact. At that\r\ntime Mr Parker had a portfolio of shares, although Pace shares predominated. Mr\r\n35 Hooper took the view that Mr Parker was over-exposed to Pace and advised him\r\nto diversify his holdings; the advice was repeated on several occasions. Mr Parker\r\nactively sought Mr Hooper s advice about shares he might buy but then ignored\r\nthe advice he received. Rather than diversify he instructed Redmayne Bentley on\r\nan execution-only basis, in March 2000, to sell all of his shares other than those in\r\n40 Pace and to buy Pace shares with the proceeds. Mr Hooper steadfastly continued\r\nto advise Mr Parker to diversify but he, equally steadfastly, disregarded the\r\nadvice, and dealt only in Pace shares. We should, however, add that one of his\r\nacquisitions occurred in September 2001 when he exercised an option which had\r\nthen matured to buy 20,000 Pace shares which he subsequently sold, in parcels of\r\n45 5000 shares each, in October and November 2001. Mr Parker cannot be criticised,\r\nwe think, for an acquisition of Pace shares by the exercise of an option.\r\n33\r\n101. Surprisingly, Mr Hooper learnt only in October 2001 that Mr Parker was\r\nPace s credit risk and treasury manager. As it is apparent from other evidence that\r\nMr Parker did not set out to conceal the nature of his employment from those with\r\nwhom he came into contact, we have concluded that Mr Hooper must have\r\nomitted to ask for details of his employment, or to check 5 Redmayne Bentley s\r\nexisting records. As soon as he became aware that Mr Parker was employed by\r\nPace in a sensitive position he recognised that the fact must be recorded by\r\nRedmayne Bentley s compliance department, and he sent an appropriate\r\nnotification to Mr Paxton, the compliance officer. Redmayne Bentley s rules also\r\n10 required him to monitor Mr Parker s dealings, particularly those which took place\r\nshortly before the publication of Pace s results or other significant information.\r\n102. Despite Mr Hooper s advice that he should diversify his portfolio away\r\nfrom Pace shares, Mr Parker bought 1450 Pace shares for his wife s ISA account\r\non 18 January 2002, again on an execution-only basis. On 28 February 2002 he\r\n15 sold those shares and 5467 shares in his own name, the residue of his holding\r\n(although he still had some options which had not matured). We will return to the\r\nsales at a later stage; here, we need only to record the fact that, rather than instruct\r\nMr Hooper to arrange the sale, Mr Parker telephoned Redmayne Bentley s\r\nbroking room and gave instructions for the sale on an execution-only basis. When\r\n20 Mr Hooper learnt of Pace s announcement on 5 March 2002 he checked Mr\r\nParker s account, as Redmayne Bentley s rules required, and discovered that the\r\nsales had taken place. He reported them to Mr Paxton (who may additionally have\r\ndiscovered them for himself). Mr Paxton concluded that the sales were suspicious\r\n(the fact that Mr Parker had used the broking room rather than Mr Hooper was\r\n25 itself regarded as suspicious, although he had done this previously without raising\r\nsuspicion) and made a report to the Stock Exchange which, in turn, appears to\r\nhave referred the matter to the Authority.\r\n103. Mr Parker s acquaintance with BPR Financial Management began on 12\r\nDecember 2001 when, at his own request, he met Mr Bartles. He later attended\r\n30 another meeting on 10 January 2002 at which Mr McCarthy was also present.\r\nBPR used information about the historical price movements of shares, reduced to\r\ncharts, rather than analysis of companies results and forecasts as a means of\r\npredicting future movements, a technique which had as Mr Bartles, Mr\r\nMcCarthy and Mr Parker all told us been remarkably successful. The method,\r\n35 and its application to a number of securities, including Pace shares, were\r\ndiscussed at the meetings but, although Mr Parker signed an engagement letter, he\r\ndid not in fact instruct BPR to advise him about investments. Mr Bartles\r\nrecommended that Mr Parker buy an insurance investment bond in which he\r\ninitially expressed some interest but, despite Mr Bartles repeated reminders, he\r\n40 did not do so.\r\n104. Mr Parker told us that he had been advised by Mr Bartles, in an off-the-cuff\r\nremark, that he should go short on Pace shares, that is put himself in a position\r\nto profit from a fall in price. Mr Bartles told us he had no recollection of making\r\nany such remark, nor could he think of any reason why he might have done so,\r\n45 though it was possible that he was responding in a non-committal way to a\r\ncomment that Mr Parker made to him. It is quite obvious, not only from Mr\r\nBartles evidence but also the contemporaneous correspondence that, from a point\r\n34\r\nvery soon after the second meeting, he was trying to sell the bond and was\r\noffering no other service or advice to Mr Parker. Again, we have concluded that\r\nthe alleged suggestion is an invention of Mr Parker s, designed to justify his later\r\nconduct. It is conspicuous that the first bets he placed after the alleged\r\n5 recommendation were long rather than short.\r\n105. It seems to us quite clear from the evidence that Mr Parker hoped to pick Mr\r\nHooper s, Mr Bartles and Mr McCarthy s brains in his discussions with them, but\r\nhad no serious intention of paying for any advice he received. None of the advice\r\nthey offered was followed and we are sure nothing any of them said had any\r\n10 influence over Mr Parker s actions between 27 February and 4 March 2002.\r\nIG Index\r\n106. So far as we are aware, Mr Parker placed all of his spread bets and\r\ncertainly all those which were identified to us with IG. We will describe the\r\nspread bets themselves later in this decision; at this point we deal with Mr\r\n15 Parker s contention that personnel of IG Index and of its sister company IG\r\nMarkets (there was some movement of personnel between the two) offered him\r\nadvice about his strategy. IG is a spread-betting company offering an executiononly\r\nservice, and no other facility; indeed, the nature of its business is such that it\r\nis prohibited from offering advice about specific bets, since it invariably has a\r\n20 conflict of interest with its customers, though it is not precluded from offering\r\nadvice about the mechanics of spread betting.\r\n107. The four employees of IG who gave evidence all denied that they had\r\noffered any advice to Mr Parker, save for technical advice about the bets which he\r\ncould place and the manner in which he could open, close and adjust them. They\r\n25 knew of and followed the rule prohibiting the giving of advice about specific bets;\r\nwhile they would listen politely to Mr Parker and any other customer, they\r\navoided making any comment which might be construed as advice. Mr Parker s\r\ncontention was that, while they did not offer overt advice about individual bets he\r\nmight place, they had made hints, and they had also advised about his overall\r\n30 strategy.\r\n108. Almost all of Mr Parker s contact with IG was by telephone. IG s policy\r\nwas to record all telephone conversations between customers and its brokers, in\r\ncase of dispute about the terms of any bet which was placed, and we were\r\nprovided with transcripts of most of Mr Parker s conversations. A few of the\r\n35 records could not be traced or were corrupted, but we are sure that there is nothing\r\nsinister in that and that the transcripts we do have are typical. They bear out the\r\nevidence of IG s employees, that they listened to Mr Parker, sometimes making\r\npolite but neutral remarks. Nothing they said could in our view reasonably be\r\nconstrued as the giving of advice, other than technical advice about the mechanics\r\n40 of placing a bet.\r\n109. In particular, although it is certainly true that Mr Parker made it clear from\r\nthe outset to those IG employees to whom he spoke that he was engaging in a\r\nhedging strategy, as we have already described it, and it is not inconceivable that\r\nhe thought they were advising him about his strategy, we are satisfied that they\r\n45 were in fact doing no more than to indicate to him whether or not what he had in\r\n35\r\nmind could be achieved by one means or another and, sometimes, which of two\r\npossible means would be more suitable. We are in no doubt that they did not\r\nrecommend a particular bet, or adjustment of a bet, to him save in the sense that\r\nthey might indicate that he could achieve the objective he had already described to\r\nthem more effectively in one way rather than another, but 5 that he was left to make\r\nhis own choices about the shares on which he would bet, whether he would take a\r\nlong or short position, the size of the bet and the placing of any stops. Similarly,\r\nhe made his own decisions about the subsequent adjustment of stops and the\r\nclosing of bets.\r\n10 110. We are, in fact, satisfied that IG did not really have any understanding of\r\nwhat Mr Parker was doing until shortly before the sharp fall in Pace s share price\r\non 5 March 2002. Mr Wilkes, who was a senior dealer, had his attention drawn by\r\na junior dealer in his team to Mr Parker s bets and the disadvantageous position in\r\nwhich IG found itself as a result disadvantageous in that, as we have already\r\n15 mentioned, IG was exposed in a manner against which it could not fully protect\r\nitself. Mr Wilkes was suspicious of Mr Parker s deals and, after the price of Pace\r\nshares fell on 5 March, he reported the deals to IG s compliance department\r\n(which also reported them to the Authority). It is, in our view, wholly implausible\r\nthat IG employees would advise Mr Parker to deal in a way which was so\r\n20 detrimental to IG s interests. For these reasons, too, we reject his claim that they\r\ndid advise him.\r\nMr Parker s actions between 27 February and 4 March 2002\r\n111. On the morning of 27 February, Mr Parker owned 5,467 Pace shares, and\r\nhis wife held 1,450 shares in her ISA. Mr Parker had unexercised options to buy\r\n25 30,063 shares, at various dates in the future: at that point, all but 5,000 were in\r\nthe money . The options include the new SAYE option which Mr Parker had\r\ntaken up in January but to which he could not contribute until April, when an\r\nexisting SAYE option matured. His open spread bets on Pace shares were:\r\na. A long bet, placed on 19 February, of £250 per point, at a strike price\r\n30 of 315p and with a stop at 250p (which had originally been placed at\r\n290p);\r\nb. A short bet, also placed on 19 February, of £250 per point, at a strike\r\nprice of 299p and with a stop at 324p;\r\nc. A long bet, placed on 25 February, of £250 per point, at a strike price\r\n35 of 299p and with a stop at 225p;\r\nd. A long bet, placed on 25 February, of £250 per point, at a strike price\r\nof 314.5p and with a stop at 250p; and\r\ne. A short bet, also placed on 25 February, of £250 per point, at a strike\r\nprice of 297.5p and with a stop at 350p.\r\n40 Bets a and b together, and bets d and e together, constituted synthetic straddles .\r\nBets a and b notionally cost Mr Parker £4,000, as we explained in paragraph 91\r\nabove. Bets d and e notionally cost £4,250. Bet c was a consolidation of five £50\r\nper point long bets which Mr Parker had opened on different dates between 16\r\nJanuary and 15 February. His net position, taking spread bets alone, was £250 per\r\n36\r\npoint long. If any of his short spread bets should be regarded as a hedge relating to\r\nhis or his wife s shares and options, his net spread betting position was longer\r\nstill. We agree with Mr Warner that his position, at that point, was consistent with\r\nan expectation that Pace s share price was more likely to rise than fall and that it\r\nwas not, as Mr Parker claimed, delta neutral , although his 5 preference for a rise\r\nwas not marked. His bets were not consistent with his having hedged his holdings\r\nof shares and options, and having taken an additional speculative but neutral\r\nposition. Mr Parker s position on the morning of 27 February was consistent with\r\nhis believing that Project Pluto would succeed, but we read no more into it than\r\n10 that.\r\n112. Mr and Mrs Parker had arranged a skiing holiday in France, to begin on\r\nSaturday 2 March 2002. They had decided to travel by train, and left their home\r\non the morning of Friday 1 March, breaking their journey and staying overnight in\r\nParis. Mr Parker had already arranged that he would leave work at about\r\n15 lunchtime on 28 February, presumably in order to prepare for an early departure\r\nthe following morning. Despite the need (one assumes) to finish any of Pace s\r\nwork which he had not already completed, he found the time to undertake a\r\nnumber of transactions, during working hours, on the afternoon of 27 February\r\nand the morning of 28 February. He did not seek (nor did he already have)\r\n20 permission, within the Pace share dealing rules, to effect any of them.\r\n113. The first was the closing, at 2.35 pm on 27 February, of the £250 per point\r\nlong bet he had placed with IG on 25 February (bet c in the list above). In the\r\nsame telephone call he instructed IG to move the stops on his two other long bets,\r\na and d, from 250p to 270p. The effect of the first transaction was to remove both\r\n25 his opportunity to gain from a rise in the price of Pace shares and his exposure to\r\na loss if the price fell, and of the second to reduce his losses (by closing the bets\r\nsooner and at a higher level) if the fall occurred.\r\n114. Seven minutes later, he made another call to IG, opening a new short bet of\r\n£250 per point, at a strike price of 297.5p, with a stop at 330p at this time the\r\n30 market price of Pace shares was just above 300p. After a further seven minutes he\r\ncalled again to place a second bet, identical save that the strike price was 299.5p.\r\nThus by the end of that day Mr Parker had open long bets of £500 per point, and\r\nshort bets of £1,000 per point.\r\n115. At 11.41 am on 28 February, Mr Parker placed a further short bet of £10 per\r\n35 point at a strike price of 291p (he accepts that this was a mistake his intention\r\nwas to place a bet of £100 per point). He did not arrange a stop to protect him if\r\nthe share price should, after all, rise and he was, if only theoretically, exposed to\r\nthe risk of an unlimited loss. Four minutes later he telephoned Redmayne Bentley\r\nand arranged the sale of his and his wife s remaining Pace shares. By the end of\r\n40 the day, he had short bets of an aggregate value of £1010 per point, long bets of\r\n£500 per point and no shares, though he still had unexercised (and at that time\r\nunexercisable) options to buy 30,063 shares. His bets were £610 net short; of that\r\nonly just over £300 could be attributed to his hedging his options (and only £250\r\nif, with Mr Warner, one discounts the options which were out of the money ).\r\n45 The change in his position from his modestly net long position on the morning\r\nof 27 February to his net short position by the afternoon of 28 February is not\r\n37\r\nconsistent, therefore, with a hedging strategy; nor can we accept Mr Parker s\r\nclaim that his position remained delta neutral throughout. There was an\r\nunambiguous and substantial switch of preference from a rise in the share price to\r\na fall.\r\n116. On 1 March, while he was travelling to his holiday, 5 Mr Parker made no\r\nfewer than nine calls to IG, eight of which were (as we are sure) designed to\r\ndiscover whether there had been significant movement in Pace s share price.\r\nHowever, in one call, at 8.15 am, he placed another short bet, of £100 per point at\r\na strike price of 288p with no stop, on Pace shares, and in another call he opened a\r\n10 spread bet on Astra Zeneca shares. He appears to have undertaken no other\r\ntransactions on that day. On the next two days, Saturday and Sunday, the markets\r\nwere closed.\r\n117. On the following Monday, 4 March, when Mr Parker had begun his skiing\r\nholiday, he made four calls to IG, though he appears to have given instructions\r\n15 relating to bets only once, when as early as 8.02 am he asked IG to move various\r\nstops. Those on his two long bets (each at £250 per point: the stops were then at\r\n270p) were moved to 265p and 260p respectively: those adjustments increased the\r\namount he would lose if the share price fell significantly. However, at the same\r\ntime he arranged that the stops on his short bets be moved. That arrangement had\r\n20 no effect on his ultimate position and it is not immediately clear why he asked that\r\nthose stops should be moved. Certainly we do not accept that the moves were part\r\nof a pyramid strategy, as Mr Parker suggested. Rather, we think the moves may\r\nhave been designed to conceal from IG the fact that there was a significant change\r\nin the directional preference of his open spread bets.\r\n25 118. Pace s profit warning was published at 7 am, UK time, on Tuesday 5\r\nMarch. Mr Parker learnt of it by means of a telephone call from his father during\r\nthe course of the morning or early afternoon. As we have already indicated, the\r\nprice of Pace shares fell almost immediately the announcement was made, from\r\n304p to about 100p, the level at which it stood at the close of the market. As early\r\n30 as 8.04 am (that is, a few minutes after the market opened), both of Mr Parker s\r\nlong bets had automatically closed, because the stops were triggered.\r\n119. During the day Mr Parker rang colleagues at Pace, in order to find out more\r\nabout the terms of the announcement, and he also spoke to IG on three occasions.\r\nAt 1.49 pm, UK time, he made the first of his calls to IG, in order to close the\r\n35 £100 per point short bet he had placed on 1 March, thus crystallising the profit he\r\nhad made on it, and to adjust the stops on those four of his short bets which had\r\nstops in place (at that time at 320p, 325p, 330p and 335p respectively) in order\r\nthat they should close at 145p, 150p 155p and 160p that is, he kept them open so\r\nthat he would gain from any further fall in the price, while they would close and\r\n40 crystallise most of his gains if the price should recover. It is apparent from the\r\ntranscript of that call that he was elated about the dramatic fall in the share price\r\nLess than two hours later he telephoned IG in order to lower the stops again, to\r\n130p in two cases and 135p in the other two, reducing the risk of erosion of his\r\nprofit still further. In his third call he attempted to lower the stops again, but it was\r\n45 by then too late in the day; the adjustment was made following a further call at\r\n38\r\n8.14 the next morning; he then had two stops at 130p, one at 125p and one at\r\n120p.\r\n120. Mr Parker s remaining bets were closed on 6, 7 and 12 March. Two bets at\r\n£250 per point closed automatically when the stops were reached they should in\r\nfact all have been closed on 6 March but, apparently because 5 of a failure of IG s\r\nsystem, two were not closed until the next day. Mr Parker telephoned IG to close\r\nthe £10 per point bet, which had no stop, on 12 March. By then, he had returned\r\nfrom his holiday. He had received an enquiry from IG about his dealings on 11\r\nMarch and answered, in a long fax, on 12 March. On the following day he spoke,\r\n10 by telephone, to IG s compliance officer. Mr Parker is shown by the transcript of\r\nthe call to have recognised that his actions might appear suspicious, and to have\r\nbeen at pains to insist that he had no inside information. It is also apparent from\r\nthe transcript that IG s compliance officer had felt obliged to report Mr Parker s\r\ndealings about which he had heard from Mr Wilkes to the Authority. We deduce\r\n15 too, that Redmayne Bentley s concerns had by then reached the Authority.\r\n121. Early on the morning of 14 March, Mr Parker was asked to attend a meeting\r\nwith Mr Williams, Mr Dixon and Maggie Pedder, Pace s director of personnel. It\r\nis clear from the minutes of the meeting that it was prompted by an approach to\r\nMr Dixon by the Authority. Mr Parker was asked about his dealings. He was\r\n20 adamant that he had done nothing wrong but he was nevertheless suspended from\r\nwork and escorted from the premises. We understand that he never returned and in\r\nJuly 2002 ceased to be employed by Pace, though we were not made aware of the\r\nterms on which his employment was terminated.\r\nThe Pace Final Notice\r\n25 122. On 24 January 2005 a Final Notice was sent to Pace, because the RDC had\r\ndecided it should suffer a penalty of £450,000. It was considered (so the Final\r\nNotice recorded) that Pace had failed to take reasonable care to ensure that the\r\nannouncement of its interim results on 8 January 2002 did not omit relevant\r\ninformation; and that Pace ought to have made an announcement about its\r\n30 expected turnover for the financial year on or soon after 4 February 2002. These\r\nfailings were said to amount to breaches of Listing Rules 9.3A and 9.2(c)\r\nrespectively. Pace accepts, as Mr Dixon told us, that the Final Notice is factually\r\ncorrect.\r\n123. Mr Parker s case was that there are inconsistencies between what is alleged\r\n35 by the Authority against Pace, and what is alleged against him. He is aggrieved\r\nthat he has suffered a penalty which is as much as two thirds of that imposed on a\r\nquoted company, and he is aggrieved too that no penalty has been imposed on\r\nPace s officers or on others on the restricted list who dealt in Pace shares between\r\n27 February and 5 March. As we have observed elsewhere in this decision, the\r\n40 conduct of others is not before us in this reference, and it is not appropriate for us\r\nto express any opinion about that conduct. We do, however, need to deal with Mr\r\nParker s contention that the Authority s position is inconsistent.\r\n124. In our view, his argument is misconceived. The question addressed in the\r\nPace Final Notice is whether Pace made appropriate and timely announcements\r\n45 when required by the Listing Rules to do so. It is true that the FSA acknowledges,\r\n39\r\nin that Notice, that some information about Pace s financial position, beyond that\r\ncontained in formal announcements, was in the public domain (so much is in any\r\nevent apparent from the brokers comments and the two analyses of January 2002\r\nto which we have referred) and that some of the information, such as the\r\nwithdrawal of trade credit insurance, was not of a character 5 which demanded an\r\nannouncement. But that is not to the point. The questions for our determination in\r\nthis reference are whether, between 27 February and 4 March 2002, Mr Parker\r\nhad information which was not available generally and which was relevant, and\r\nwhether he acted on it. The two critical pieces of information are that a profit\r\n10 warning was imminent and that Project Pluto had failed. There plainly was no\r\nmarket knowledge of these two facts. There may have been some general\r\nawareness that Pace s financial position was not as good as the earlier\r\nannouncements had suggested, but there is no evidence that a warning was\r\ngenerally expected. We recognise that WestLB, in its January analysis, had\r\n15 mentioned that a warning was a possibility, but its view was expressed in\r\nimprecise and tentative terms and does not seem to have been shared by others: on\r\nthe contrary, the dramatic fall in the share price, and the absence of any recovery\r\nin it, clearly show that the market as a whole was taken by surprise when Pace\r\nmade its announcement on 5 March. Mr Parker laid much emphasis on the fact\r\n20 that Project Pluto was not announceable (so that it should, he said, be left out of\r\naccount) but, as we shall later explain, we are satisfied that this is not the correct\r\nway to view the matter and that the failure of Project Pluto is of considerable\r\nimportance.\r\n125. There is, in our view, nothing in the Pace Final Notice which assists Mr\r\n25 Parker. Indeed, if, as the Notice implies, Pace had withheld from the market\r\ninformation which Mr Parker had, his position is worse rather than better, but as\r\nwe are not required to make any findings about the Notice, and have heard no\r\nevidence directly relating to it, we have left those considerations out of account.\r\nWhether market abuse is established\r\n30 126. The characteristics of market abuse are prescribed by section 118 of the\r\nFSMA, which we set out at paragraph 7 above. In summary, in the context of this\r\ncase, the Authority must satisfy us (there being no dispute that the relevant\r\ntransactions occurred and that his conduct related to qualifying investments traded\r\non a market to which the section applies) that Mr Parker was in possession of\r\n35 relevant information not generally available (RINGA), that his behaviour was\r\nbased on that information, and that his conduct fell below the standard reasonably\r\nto be expected by a user of the market of a person in his position. It is incumbent\r\non the Authority to satisfy us of those three matters in respect of each of the\r\nimpugned transactions. It is not, however, necessary to show that Mr Parker s\r\n40 conduct was dishonest, nor that he gained by it; dishonesty and gain (or intended\r\ngain) may be common features of market abuse, and may constitute evidence of it,\r\nbut they are not mentioned in section 118 and are not essential ingredients of\r\nmarket abuse.\r\n40\r\nDid Mr Parker have RINGA?\r\n127. As we have already explained, at paragraph 10 above, it is necessary to\r\njudge a person s conduct not only against the requirements of FSMA itself, but by\r\nthe standards and other criteria set out in COMC. A summary of those standards\r\n5 and criteria appears at paragraph 1.4.4 in these terms:\r\nBehaviour will amount to market abuse (unless MAR 1.4.20C MAR 1.4.31C\r\napply) in that it will be a misuse of information where a person deals or arranges\r\ndeals in any qualifying investment or relevant product where all four of the\r\nfollowing circumstances are present:\r\n10 (1) the dealing or arranging is based on information. The person must be in\r\npossession of information and the information must have a material\r\ninfluence on the decision to engage in the dealing or arranging. The\r\ninformation must be one of the reasons for the dealing or arranging, but need\r\nnot be the only reason;\r\n15 (2) the information must be information which is not generally available.\r\nCriteria for determining whether information is generally available are set\r\nout in MAR 1.4.5E;\r\n(3) the information must be likely to be regarded by a regular user as relevant\r\nwhen deciding the terms on which transactions in the investments of the kind\r\n20 in question should be effected. Such information is referred to in this Code\r\nas relevant information . Factors which are to be taken into account when\r\ndetermining whether information is relevant information are set out in MAR\r\n1.4.9E to MAR 1.4.11E;\r\n(4) the information must relate to matters which the regular user would\r\n25 reasonably expect to be disclosed to users of the particular prescribed\r\nmarket. As explained further below at MAR 1.4.12E and MAR 1.4.13E, this\r\nincludes both matters which give rise to such an expectation of disclosure or\r\nare likely to do so either at the time in question, or in the future.\r\n128. It is apparent from that summary that the enquiry must begin with an\r\n30 analysis of the information available to the person concerned. The information\r\nmust be relevant in that it influenced the person s conduct and would also be\r\nregarded by a regular market user as relevant and disclosable. Information\r\navailable to a person about his own circumstances might be regarded by him as\r\nrelevant, and may motivate his actions, but would not satisfy the second\r\n35 condition. COMC, at paragraphs 1.4.9 and 1.4.10, expands on the meaning of\r\nrelevant information:\r\n1.4.9Whether, in a particular case, a particular piece of information would, or\r\nwould be likely to, be regarded as relevant information by the regular user will\r\ndepend on the circumstances of the case. In making such a determination, the\r\n40 regular user is likely to consider the extent to which:\r\n(1) the information is specific and precise;\r\n(2) the information is material;\r\n(3) the information is current;\r\n(4) the information is reliable, including how near the person providing this\r\n45 information is, or appears to be, to the original source of that information\r\nand the reliability of that source;\r\n41\r\n(5) there is other material information which is already generally available to\r\ninform users of the market; and\r\n(6) the information differs from information which is generally available and\r\ncan therefore be said to be new or fresh information.\r\n1.4.10 In the case of information relating to possible future 5 developments (which\r\ndo not currently give rise to an expectation of disclosure (MAR 1.4.4E(4)), the\r\nfollowing additional factors are to be taken into account when determining the\r\nrelevance of that information (see example in MAR 1.4.18E):\r\n(1) whether the information provides, with reasonable certainty, grounds to\r\n10 conclude that the possible future developments will, in fact, occur; and\r\n(2) the significance those developments would assume for market users given\r\ntheir occurrence.\r\n129. What the regular user might reasonably expect to be disclosed is described\r\nin paragraphs 1.4.12 to 14:\r\n15 1.4.12 Information will only fall within MAR 1.4.4E(4) if it is either:\r\n(1) information which has to be disclosed in accordance with any legal or\r\nregulatory requirement (referred to as disclosable information ); or\r\n(2) information which his routinely the subject of public announcement although\r\nnot subject to any formal disclosure requirement (referred to as\r\n20 announceable information ).\r\nIn case of information relating to possible future developments (MAR 1.4.4E(4)\r\nand MAR 1.4.10E), which may lead to a disclosure or an announcement being\r\nmade, the following additional factor is to be taken into account when determining\r\nwhether the information is to be treated as disclosable information or as\r\n25 announceable information, namely whether the information provides, with\r\nreasonable certainty, grounds to conclude that the possible future developments\r\nwill, in fact, occur and accordingly that a disclosure or announcement will, in fact,\r\nbe made (see example in MAR 1.4.18E).\r\nExamples of disclosable information include:\r\n30 (1) information which is required to be disseminated under the Takeover Code\r\nor SARs on, or in relation to, qualifying investments traded on prescribed\r\nmarket;\r\n(2) information relating to officially listed securities which is required to be\r\ndisclosed under the Listing Rules;\r\n35 (3) information which is required to be disclosed to a prescribed market under\r\nthe rules of an RIE .\r\n130. The Authority s case, in a nutshell, is that by the middle of the day on 27\r\nFebruary 2002 Mr Parker knew: that Pace had not been able to persuade NCM to\r\nrestore insurance cover of NTL s debt (and also knew that restoration in the near\r\n40 future was very unlikely); that NTL s uninsured debt to Pace was large; that sales\r\nwere being made to NTL in respect of which payment could be expected on\r\nhitherto indeterminate dates months in the future; that the F9 forecast was\r\nextremely poor; that a profit warning would probably be issued in the near future;\r\nand that Project Pluto had foundered. Mr Parker did not deny that he knew all\r\n45 those things save for the imminence of a profit warning, although we should also\r\n42\r\nrepeat his evidence that the F9 forecast was at least according to Mr Bown\r\nmuch the same as its predecessors. His contention, in summary, was that NTL s\r\nprecarious financial state and Pace s dependence on NTL, as its major customer,\r\nwere well known in the market and that any additional information he had was no\r\nmore than supplementary detail, adding nothing of substance 5 to what could be\r\nreadily determined by research and analysis (so that section 118(7) protected\r\nhim); that Pace, NTL and NCM had come to an agreement recorded in the letter\r\nhe had himself sent to NTL and which he confidently expected to be signed by\r\nNTL; that he had no greater reason to believe than anyone else that Pace would\r\n10 soon issue a profit warning; and that Project Pluto was irrelevant.\r\n131. Although paragraphs 1.4.9 and 1.4.10 of COMC do not have the same\r\nstatutory significance as the paragraphs which deal with behaviour (see paragraph\r\n12 above), it is, we think, necessary to measure the information which a person is\r\nsaid to have had against the criteria they identify (though not taking those criteria\r\n15 as exhaustive): in other words, the mere fact that a person relies on information\r\nnot generally available is not enough. Where it can reasonably be argued that the\r\ncriteria are not satisfied the person in possession of the information should not be\r\nexposed to the imposition of a penalty. We propose therefore to identify and to\r\neliminate from the information Mr Parker had, that material which was generally\r\n20 known or readily discovered, and then to consider what remained.\r\n132. It is certainly true that Pace s dependence on NTL was well-known in the\r\nmarket, and it was equally well-known that NTL was experiencing acute financial\r\ndifficulties. Pace had, however, been less than candid about its trading relations\r\nwith NTL, and about the withdrawal by NCM of Pace s insurance of NTL s debt.\r\n25 It is apparent from the public relations consultants report and the analyses of\r\nWest LB and Commerzbank that these facts were not generally known in January,\r\nand there was no evidence before us to suggest that the position changed before 5\r\nMarch 2002 on the contrary, the news seems to have come as a surprise to all\r\noutside Pace. Mr Parker, however, knew very well that NCM had withdrawn\r\n30 cover and, perhaps more than anyone within Pace including Mr Miller and Mr\r\nDyson he realised that restoration of cover in the near future was highly\r\nimprobable. He knew, whereas the market did not, that Pace had resorted to\r\ngenerating invoices in respect of boxes which had been manufactured for NTL but\r\nwhich had not been delivered, and he must have realised the effect the release of\r\n35 that information, were it to occur, would have on Pace s share price. In fact, that\r\ninformation did not, we think, become public knowledge (if indeed it ever did)\r\nuntil long after 5 March. There is nothing in the analyses we have mentioned, nor\r\nin the consultants report to Pace following the presentation at the time the interim\r\nresults were released, which might indicate that Pace s problems were as acute as\r\n40 in fact they were. Project Pluto, as was common ground, never became generally\r\nknown. It goes without saying that no-one outside Pace, apart from its\r\nprofessional advisers, knew before it was made that a profit warning was\r\nimminent (WestLB s opinion was no more than an opinion). The mere fact that\r\nthe profit warning led to a fall, of about two thirds, in the price of Pace shares\r\n45 speaks for itself: it is consistent only with the market having been taken by\r\nsurprise. The fact that the share price remained depressed for weeks after the\r\nannouncement shows too that the sudden fall was not due to temporary over43\r\nreaction: the market plainly saw the announcement as a reflection of a significant\r\nand permanent change in outlook for Pace. The argument that an astute analyst\r\ncould have worked out for himself all that Mr Parker knew is unsustainable.\r\n133. We have already recorded that the telephone conversation of 27 February\r\n2002 between Mr Williams and Mr Parker is not of fundamental 5 importance.\r\nAlthough Mr Parker was not privy, by that stage, to all of the detail, he was in no\r\ndoubt that Pace s prospects of receiving from NTL on time all the payments on\r\nwhich its turnover and profit forecasts were based were negligible, that Pace was\r\nclose to breaching its banking covenants and that its credit risk insurance on the\r\n10 outstanding uninsured and any new NTL debt was most unlikely to be restored in\r\nthe near future. Mr Parker accepts that he knew of the abandonment of Project\r\nPluto, even though his evidence about the source of that information is at odds\r\nwith the other evidence. We are satisfied that, even without Mr Williams\r\ncomment that a profit warning was imminent, Mr Parker would have worked out\r\n15 for himself that Pace could not conceivably achieve the turnover and profit for the\r\nyear it had indicated to the market in January.\r\n134. Had the takeover of Pace proceeded, the prospects of a profit warning would\r\nhave been of limited importance almost certainly Pace s difficulties, if news of\r\nthem were released, would not have led to a fall in the price of its shares, which\r\n20 one might instead expect to rise once the takeover was disclosed. Without the\r\ntakeover, a fall was inevitable. The significance of Mr Williams comment that a\r\nprofit warning was imminent was that Mr Parker would realise from it that,\r\nwithout the contrary effect of the takeover, a drop in the share price was highly\r\nlikely within the near future. We have concluded that he has denied the\r\n25 conversation because it indicates clearly that he did have information capable of\r\nprompting his actions on 27 and 28 February 2002, and which undoubtedly was\r\nnot in the public domain.\r\n135. We come, therefore, to consider whether a regular market user would regard\r\nthe information as relevant. There is, at first sight, some merit in the contention\r\n30 that Project Pluto was not relevant. As Mr Parker correctly said, it was never\r\nannounced to the market, either when talks were under way or when they\r\ncollapsed and, as far as we are aware, it remains generally unknown. It was\r\ncertainly not announceable since, by the time they were called off, the\r\ndiscussions had not reached the stage at which either Pace or the prospective\r\n35 acquirer needed to disclose them to the market (at least, that can be deduced to be\r\nthe opinion of the boards of the two companies who were both guided by\r\nprofessional advice: we were given very little information about the discussions\r\nand the stage they had reached when they were finally called off). Those\r\nconsiderations, however, seem to us to be beside the point. Paragraph 1.4.13 of\r\n40 COMC makes it clear that information relating to possible future developments\r\nwhich may lead to a disclosure as an agreed takeover of Pace plainly would is\r\nrelevant, provided that the information indicates that the future event is reasonably\r\ncertain to occur. The important and relevant information in Mr Parker s\r\npossession, however, was not that Project Pluto would come to fruition we are\r\n45 quite willing to accept that he did not know, and had no means of knowing, how\r\nlikely that was but that it definitely would not occur. The significance of the\r\ninformation is that Mr Parker knew that the prospective takeover would not now\r\n44\r\nprevent the fall in the share price which could be expected to follow the profit\r\nwarning, and that it would not make a profit warning unnecessary.\r\n136. The relevance of the remaining information is, in our view, impossible to\r\nchallenge. Each item NTL s increasingly overdue debt, the withdrawal of\r\ninsurance cover, the continuing difficult negotiations with 5 NTL and the inflation\r\nof Pace s apparent sales by the invoicing of boxes which had not been delivered\r\nundermined Pace s hopes of meeting its earlier forecasts; cumulatively they made\r\nit obvious that the results for the year would be significantly lower than had been\r\nprojected.\r\n10 137. The information was also specific and precise, correct and different from\r\nthat available generally. It was reliable: some, such as the cancellation of the\r\ninsurance cover, came to Mr Parker first hand; other items, such as Mr Williams\r\nprediction of a profit warning, came to him from people in a position to know.\r\nThe fact that the share price fell once an announcement prompted by that\r\n15 information had been made can, again, lead only to the conclusion that the\r\ninformation was material. We have, therefore, no doubt that Mr Parker was in\r\npossession of RINGA, as that term is to be construed in accordance with COMC,\r\non 27 February 2002.\r\nWas Mr Parker s behaviour based on RINGA?\r\n20 138. The Authority relies on inference in its contention that Mr Parker s conduct\r\nbetween 27 February and 4 March was based on the RINGA which we have found\r\nhe had. It relies on the facts that, within a very short time of his learning that\r\nProject Pluto had been abandoned and that a profit warning was likely, he entered\r\ninto a number of transactions, that he did so without seeking or obtaining\r\n25 permission to deal and that his position that is, his aggregate holdings of shares\r\nand options, taken with his spread bets changed from one mildly favouring a\r\nrise in Pace s share price to one distinctly favouring a fall. The facts, it says, speak\r\nfor themselves: there is no other rational explanation for Mr Parker s conduct than\r\nthat he acted upon the RINGA he had acquired, and that the requirements of\r\n30 section 118(1) and (2) of FSMA are satisfied.\r\n139. Mr Parker s case is as we have already described it: that he was continuing\r\nwith a pre-determined strategy of hedging his options and building a straddle (and\r\nthereafter a pyramid straddle) position with a view to his benefiting from the\r\ninherent volatility in Pace s share price and that even if, contrary to his denial, he\r\n35 was in possession of RINGA, he did not rely on it.\r\n140. In our view the Authority s argument is compelling. We agree with Mr\r\nWarner that Mr Parker s position changed from one which would, on balance,\r\nbenefit from a rise in Pace s price but which could be regarded, in part, as a\r\nhedging position and otherwise, even with some reservations, as a neutral, or\r\n40 nearly neutral, speculative position designed to profit from a swing in either\r\ndirection, to one which strongly favoured a fall in Pace s share price. The\r\ntransactions Mr Parker effected from the afternoon of 27 February onwards, as we\r\nhave already described them, were virtually all in one direction, increasing his\r\nexposure to a fall (and therefore his opportunity to gain from it) while decreasing\r\n45 his exposure to a rise (and therefore reducing both his opportunity to gain and his\r\n45\r\nrisk of loss should a rise occur). Those transactions are entirely consistent with Mr\r\nParker s having acted upon the information which came into his possession on the\r\nmorning of 27 February (combined with the information he already had); they are\r\nnot consistent with what he had done before, or the continuation of an essentially\r\ndirectionally neutral hedging and speculative strategy. 5 We add for completeness\r\nthat we can see no grounds for distinguishing between the transactions we are\r\nsatisfied that all were undertaken for the same reasons.\r\n141. We should also add that we find other features of Mr Parker s explanation\r\nof his conduct unconvincing. The first reason he gave for his sale of his and his\r\n10 wife s shares on 28 February was that he wished to take advantage of their capital\r\ngains tax allowances for 2001-02. His wife had made neither a gain nor a loss of\r\nany consequence (she had held the shares since January, and the price had moved\r\nvery little). Her shares were in any event held within an ISA, and any gain she\r\nmade or loss she suffered would attract no tax or allowance. Mr Parker was,\r\n15 additionally, unable to explain to our satisfaction why he thought it necessary to\r\neffect a sale in the hours before he left for his holiday. If capital gains tax truly\r\nwas a consideration, he had until 5 April to sell the shares. No doubt realising that\r\nthis explanation made no sense, Mr Parker claimed instead that he was so\r\ndisillusioned with the management of Pace that he decided to seek other\r\n20 employment which, he said, he would do as soon as he had exercised his options\r\nwhich matured in March and July 2002 and to dispose of his and his wife s\r\nremaining shares. That claim is a little difficult to reconcile with his having\r\naccepted, very recently, another offer of options (though we recognise that the\r\nsums he was required to contribute would be returned to him with interest if he\r\n25 left Pace before the options matured). He still had no real explanation of his\r\nhaving effected the sale in the short time left before his holiday; had he genuinely\r\nnot thought a sharp fall in Pace s share price was imminent, he could have waited\r\nuntil his return. The combination of Mr Parker s change of explanation, the\r\nprecipitate nature of the sale and the fact that he did not go through Mr Hooper\r\n30 (though the latter may be of little consequence in itself) leads us to the conclusion\r\nthat the true reason for the sale was that Mr Parker, correctly, expected a\r\nsubstantial fall in the price and sold the shares before they dropped in value. In\r\nother words, he relied on RINGA.\r\n142. Similarly, Mr Parker s adjustments of his spread bets can be explained in no\r\n35 other way. Although, as we have said, we do not go so far as Mr Warner in his\r\ncontention that the hedges should have been removed as soon as the shares were\r\nsold and the options became out of the money , Mr Parker did not merely leave\r\nhis bets in place until he returned from his holiday. Had his motive for selling his\r\nand his wife s shares as soon as 28 February been genuine, he could justifiably\r\n40 have left his spread bets in place, and made the necessary adjustments, at leisure,\r\non his return. His actions are consistent only with his recognising that he must act\r\nquickly if he was to benefit from (and protect himself against) the imminent fall in\r\nthe share price. That Mr Parker confidently expected a fall is borne out by the tone\r\nof his comments in his first telephone conversation with IG on 5 March. It is clear\r\n45 to us that his elation is attributable to the size of the fall, and not the fact that it\r\nhad occurred. We are quite certain that Mr Parker was confident that a fall of\r\nsome size would occur.\r\n46\r\n143. We conclude with the in our view serious obstacle in Mr Parker s way,\r\nsince it adversely affects both his credibility and the plausibility of his claim that\r\nhe was merely pursuing a strategy. It is that he did not seek permission, within the\r\nPace share dealing rules, to effect any of the relevant transactions. Had they been,\r\nas he contends, no more than a continuation of his existing 5 strategy, it is\r\nimpossible to understand why he did not do so. It will be apparent from what we\r\nhave already said that Mr Parker simply ignored the rules whenever it suited him.\r\nThough a failure to obtain permission is not, taken alone, sufficient to establish\r\nmarket abuse, we have come to the conclusion that Mr Parker s persistent failure\r\n10 to obtain permission (and not merely between 27 February and 5 March 2002 but\r\nat other times as well) was deliberate and, moreover, dishonest, in that he did not\r\nwish it to become apparent to anyone (particularly Mr Dixon) that he was dealing\r\nin Pace shares, and spread betting on them, in a manner which he suspected (we\r\nthink with good reason) would have led Mr Dixon to look very carefully at his\r\n15 requests for permission. In other words, Mr Parker knew very well that he was not\r\ncomplying with the rules. There is nothing inherently wrong about taking a\r\nspeculative position, even on the shares in one s own employers (although many\r\nmight question the wisdom of doing so, particularly in the case of a person in Mr\r\nParker s position with access to sensitive information); but a failure to act\r\n20 scrupulously within the relevant rules inevitably leads to the suspicion, if no more,\r\nthat the dealing is not altogether above board. Here, we are quite satisfied there is\r\nmore than suspicion.\r\nDid Mr Parker s behaviour fall below the standard to be expected?\r\n144. There is, in our view self-evidently, only one possible answer to this\r\n25 question. Mr Parker used information which had come to him in order to place\r\nbets to his advantage and to the detriment of IG, which he knew had no access to\r\nthe same information. Using ordinary language, that is cheating and it would be\r\nrecognised by any reasonable person as such. Mr Parker is professionally\r\nqualified and was employed by a listed company in a senior position of trust. It is\r\n30 impossible to argue (and Mr Parker did not attempt to do so) that conduct of this\r\nkind does not fall below the standard reasonably to be expected of a person in his\r\nposition.\r\nDoes Mr Parker have a safe harbour?\r\n145. Mr Parker relies on paragraphs 1.4.21 and 22 of COMC, which are in the\r\n35 following terms:\r\n1.4.21 Dealing or arranging deals will not amount to a misuse of information if\r\nthe person s possession of relevant information that is not generally available did\r\nnot influence the decision to engage in the dealing or arranging in question.\r\n1.4.22 It will be presumed for the purposes of MAR 1.4.21C that the person s\r\n40 possession of the information in question did not influence his decision to deal or\r\narrange deals if:\r\n(1) the person had taken a firm decision to deal or arrange deals before the\r\nrelevant information was in the person s possession; and\r\n47\r\n(2) the terms on which the person had proposed to enter into the transaction(s)\r\ndid not alter the receipt of the information.\r\n146. We can deal with his argument very briefly. It inevitably follows from our\r\nrejection of Mr Parker s claim that he was merely continuing with his pre-existing\r\nstrategy, and our conclusion that he deliberately set out 5 to profit from the RINGA\r\nin his possession, that he cannot bring himself within the safe harbour which these\r\nparagraphs provide. We are, therefore, satisfied to the high standard which is\r\nnecessary that the Authority has established that Mr Parker was guilty of market\r\nabuse.\r\n10 The penalty\r\nThe power to impose a penalty\r\n147. The Authority s power to impose penalties is conferred on it by section 123\r\nof the FSMA. So far as relevant to the instant case, it reads as follows:\r\n(1) If the Authority is satisfied that a person\r\n15 (a) is or has engaged in market abuse,\r\nit may impose on him a penalty of such amount as it considers appropriate.\r\n(2) But the Authority may not impose a penalty on a person if, having\r\nconsidered any representations made to it in response to a warning notice,\r\nthere are reasonable grounds for it to be satisfied that\r\n20 (a) he believed, on reasonable grounds, that his behaviour did not fall\r\nwithin paragraph (a) of subsection (1),\r\n(3) If the Authority is entitled to impose a penalty on a person under this section\r\nit may, instead of imposing a penalty on him, publish a statement to the\r\neffect that he has engaged in market abuse.\r\n25 148. The power to impose a penalty is, therefore, wholly discretionary. Even if\r\nthe Authority is satisfied that market abuse has taken place, and that subsection\r\n(2) does not prevent it from doing so, it is not obliged either to impose a penalty\r\nor to publish a statement, and the section provides no guidelines about the\r\ncircumstances in which it might respectively take no action, publish a statement or\r\n30 impose a penalty, nor about the amount of any penalty which may be imposed\r\nwhere one is appropriate. The Authority is required, by section 124, to make\r\npublic its policy regarding the imposition of penalties, and some parts of section\r\n124 are of importance. They provide:\r\n(1) The Authority must prepare and issue a statement of its policy with respect\r\n35 to\r\n(a) the imposition of penalties under section 123; and\r\n(b) the amount of penalties under that section.\r\n(2) The Authority s policy in determining what the amount of a penalty should\r\nbe must include having regard to\r\n40 (a) whether the behaviour in respect of which the penalty is to be imposed\r\nhad an adverse effect on the market in question and, if it did, how\r\nserious that effect was;\r\n48\r\n(b) the extent to which that behaviour was deliberate or reckless; and\r\n(c) whether the person on whom the penalty is to be imposed is an\r\nindividual.\r\n(3) A statement issued under this section must include an indication of the\r\ncircumstances in which the Authority is to be expected 5 to regard a person\r\nas\r\n(a) having a reasonable belief that his behaviour did not amount to market\r\nabuse;\r\n(6) In exercising, or deciding whether to exercise, its power under section 123 in\r\n10 the case of any particular behaviour, the Authority must have regard to any\r\nstatement published under this section and in force at the time when the\r\nbehaviour concerned occurred.\r\nThe Authority s published policy\r\n149. The statement envisaged by section 124 was duly produced. It forms\r\n15 Chapter 14 of the Authority s Enforcement Manual and is entitled ENF 14:\r\nSanctions for market abuse . The version in force at the material time was\r\npublished on 1 December 2001. It is lengthy and we do not propose to set it out;\r\ninstead we shall quote selectively from, or paraphrase, it as we examine its\r\nprovisions.\r\n20 150. We have already observed that three possible course of action are open: in\r\nascending order of severity, no action at all, the publication of a statement and the\r\nimposition of a monetary penalty. At paragraph 14.4.1 of ENF14, the Authority\r\nputs its own view in this way:\r\nNot all cases involving market abuse or requiring or encouraging will warrant\r\n25 enforcement action. The FSA will consider all the relevant circumstances of the\r\ncase when deciding whether to seek to impose a financial penalty or, where it is\r\nentitled to impose a financial penalty, whether a public statement would be more\r\nappropriate.\r\n151. The manual goes on to list a number of factors which the Authority will take\r\n30 into account when making its decision. The list, which expands and develops\r\nsection 124, is not exhaustive, and is indicative rather than prescriptive. It\r\nincludes the nature and seriousness of the behaviour, whether it was repeated, its\r\nimpact on the affected market, the sophistication of the person concerned and of\r\naffected market users, the amount of any gain made or loss avoided by the\r\n35 behaviour, and the conduct of the person concerned after the behaviour was\r\nidentified, particularly his attempts to put matters right.\r\n152. Though there may be exceptional cases, it would, we think, usually be\r\nappropriate to take no action at all (that is, no publicly known action a private\r\nwarning might be given) only in the case of a minor or merely technical breach, or\r\n40 one which has occurred inadvertently (or, at least, neither deliberately nor\r\nrecklessly) and where either no loss was occasioned to any other person, or any\r\nloss which was occasioned has been voluntarily and promptly made good by the\r\noffender. This is plainly not such a case.\r\n49\r\n153. As section 123(3) makes clear, a statement that a person has committed\r\nmarket abuse may be published only if he is liable to a penalty and therefore,\r\nbefore considering whether it should instead publish a statement, the Authority\r\nmust first be satisfied that a penalty might properly be imposed. If it is so\r\nsatisfied, it will, as paragraph 14.6.1 of the manual puts 5 it, consider whether to\r\npublish a statement that market abuse has occurred instead of imposing a financial\r\npenalty where it considers that such a statement may more appropriately address\r\nthe particular behaviour in question . The manual then lists a further series of\r\ncriteria the Authority will take into account, which include the person s having\r\n10 made a profit or avoided a loss (the point is made that a person should not be\r\nallowed to benefit from market abuse), the seriousness of the behaviour, whether\r\nit has been admitted, the degree of cooperation the person has offered, his\r\ncompliance history, the impact of a penalty upon him and consistency with\r\nprevious cases; again, the list is expressly stated not to be exhaustive.\r\n15 154. Section 14.7 of the manual describes the Authority s practice in determining\r\nthe amount of any penalty which is to be imposed if it decides that is the\r\nappropriate course. Paragraphs 14.7.1 and 2 read as follows:\r\n14.7.1 The FSA s approach to financial penalties in market abuse cases will be\r\nconsistent with its approach to financial penalties in other disciplinary cases\r\n20 concerning firms and approved persons.\r\n14.7.2 The FSA will take into account all the circumstances of a case when it\r\ndetermines the appropriate level of penalty, if any. The FSA does not propose to\r\nuse a tariff of penalties for market abuse cases, given the wide range of different\r\ntypes of behaviour that may amount to market abuse\r\n25 155. Those paragraphs, in our view, set out a fair and reasonable general policy.\r\nSuccessive paragraphs refer to the requirements of section 124 (which we have set\r\nout at paragraph 148 above) and list, again in a non-exhaustive manner, a number\r\nof criteria which are identified as likely to be relevant. They include the nature\r\nand severity of the effect on the relevant market, proportionality, both in relation\r\n30 to losses suffered and the nature of the behaviour, whether the conduct was\r\ndeliberate or reckless, whether the person concerned is an individual (and his\r\nfinancial resources), the amount of any gain made or loss avoided, his conduct\r\nafter the behaviour occurred and his disciplinary record, the last being relevant\r\nprimarily to persons who are or have been regulated in some way by the\r\n35 Authority, its predecessors and other regulatory bodies.\r\n156. The criteria identified by the Authority are, we think, relevant and\r\nappropriate provided that any other factors which arise in an individual case are\r\ngiven equal consideration (though not necessarily equal weight). However, one\r\nconsequence of the Authority s (entirely proper) decision to eschew the\r\n40 application of a tariff is that section 14.7 of the manual merely lists the principles\r\nand the criteria while giving little indication of how, in practice, the amount of\r\nany monetary penalty will be determined. In this case, the RDC concluded that the\r\nnature of the abuse, and the magnitude of Mr Parker s profit, were such that the\r\npublication of a statement was not the appropriate course and that a monetary\r\n45 penalty must be imposed. It went on to determine that the penalty should include\r\ntwo elements: the first, designed to recover the profit, then considered to be\r\n£153,942, and the second, a punitive and deterrent element of about the same\r\n50\r\namount but rounded down to bring the aggregate penalty to the £300,000 which\r\nwas imposed.\r\nWhat was the Authority s proper course?\r\n157. We agree that in this case it was appropriate to impose a financial penalty.\r\n5 As we have indicated, it is clearly not a case in which the Authority, nor we as the\r\nTribunal seised of the reference, could properly conclude that it would be\r\nsufficient to take no action. Nor, as we also agree, would it have been appropriate\r\nmerely to publish a statement. While the effect on the market may have been\r\nnegligible (Mr Parker s conduct is unlikely to have had any impact on the price of\r\n10 or demand for Pace shares) IG suffered a loss because it agreed to take, or adjust,\r\nbets when, had it been in possession of the same information as Mr Parker, it\r\nwould probably have acted differently. As we have said elsewhere, Mr Parker was\r\ncheating, by taking advantage of information he had but his counterparty did not\r\nhave and could not obtain. The conduct was, as we have found, deliberate, and\r\n15 repeated. Mr Parker is, of course, an individual and he is not a regulated person\r\n(although he is professionally qualified), but we do not find those factors of great\r\nsignificance: conduct of this kind is not mitigated merely because the perpetrator\r\nis an individual. The aggregate of the profit made and loss avoided, even if one\r\ntakes the lowest total achieved by the possible approaches, was substantial. Mr\r\n20 Parker has made no admissions but has sought throughout to justify his conduct.\r\nThe Authority would, in our view, be failing in its duty if it did not impose a\r\nfinancial penalty in a case of this kind. A mere statement is manifestly\r\ninsufficient.\r\n158. We agree also that one purpose of a penalty is to deprive the person\r\n25 concerned of the profit he has made by his conduct, where he has not already\r\ndivested himself of it by making good the losses suffered by those with whom he\r\ndealt. Mr Parker has not attempted to make any kind of restitution (and IG has\r\npaid his winnings to him) and the starting point, therefore, must be the amount by\r\nwhich he gained, either by making a profit or by avoiding a loss by abusive\r\n30 conduct. We deal with the identification of that amount in the next section of this\r\ndecision. We shall deal with the second, punitive, element of the penalty\r\nthereafter.\r\n159. We need first, to mention a direction which was made at an interlocutory\r\nstage of this reference. The fact that Mr Parker sold his and his wife s remaining\r\n35 shares in Pace on 28 February was either unknown to the RDC at the time it made\r\nthe decision which is the subject of this reference or, if it was known, was not\r\ntaken into account. The decision did not refer to the sale, and did not assert that it\r\nwas an incident of market abuse. For the same reason it was not taken into\r\naccount when the amount of penalty was determined. In October 2004 the\r\n40 Tribunal refused an application by the Authority for permission to amend the\r\nstatement of case in order to add an allegation that the sale amounted to market\r\nabuse. The grounds for the refusal were, in summary, that the decision referred to\r\nthe Tribunal was that made by the RDC, which could not be amended once it had\r\nbeen referred, and that the introduction of a new allegation might affect the\r\n45 amount of penalty in a manner adverse to Mr Parker that is, the Tribunal might\r\nfeel obliged to increase it. On the other hand, the Tribunal then concluded that\r\n51\r\nthere was no reason why evidence of and about the sales should not be admitted.\r\nWe have, of course, dealt with that evidence, and have recorded our conclusion\r\nthat Mr Parker s sale of his and his wife s shares was in fact abusive. However,\r\nwe shall leave the sale entirely out of account in our consideration of the\r\nappropriate penalty, not only in determining what was the 5 abusive profit but also\r\nin our consideration of the punitive element.\r\nThe abusive profit\r\n160. As we indicated at the beginning of this decision, the RDC s initial view\r\nwas that Mr Parker s abusive profit amounted to £153,942 and the penalty was\r\n10 fixed by reference to that figure. It is agreed that whether abusive or not Mr\r\nParker s bets earned him a net profit (that is, after taking all of his losses into\r\naccount) in the quarter to March 2002 of £153,942, but it is now recognised that\r\nthat figure is not the proper measure of the abusive profit. In its statement of case,\r\nthe Authority suggests a maximum amount of £164,617 but it accepts that other\r\n15 views are possible, and that the true measure of the abusive profit may be only\r\n£101,992, a figure which Mr Parker agrees is correct if, as we have found, he was\r\nguilty of market abuse, though he asserts nevertheless that various losses should\r\nbe set off against it.\r\n161. We bear in mind that this is a penalty case and that, as a matter of principle,\r\n20 doubts should be resolved in Mr Parker s favour. At the risk of stating the\r\nobvious, we should also make it clear that we regard as abusive only those profits\r\nwhich were clearly made, and those losses which were clearly avoided, by reason\r\nof Mr Parker s use of RINGA. If it could reasonably be argued that he would have\r\nacted in the same way, irrespective of his possession of RINGA, his conduct\r\n25 should not be regarded as abusive in relation to that transaction. On the other\r\nhand, we are not persuaded that losses should simply be offset against gains. If a\r\nloss was sustained as a necessary consequence of making the profit (that is, the\r\ngain could not have been made at all if Mr Parker had not exposed himself to the\r\nrisk of loss) it would be proper to take only the net gain. Where, however, the loss\r\n30 was suffered because Mr Parker failed to remove a risk of loss to which it was not\r\nnecessary to expose himself, or (as we think he may have done) left an almost\r\ncertainly loss-making bet in place in order to conceal what he was doing, he\r\nshould not have the benefit of that loss in the calculation of his abusive profit. For\r\nthose reasons we reject Mr Parker s argument that all of his losses should be\r\n35 offset against his gains.\r\n162. The first, chronologically, of Mr Parker s abusive transactions was the\r\nclosing of the long bet of £250 per point he had opened on 25 February (bet a in\r\nthe list at paragraph 111 above). We are satisfied that Mr Parker closed the bet in\r\norder to avoid the loss he would suffer if he left it open and if, as he confidently\r\n40 expected, Pace s share price fell. By closing the bet he made a modest profit of\r\n£875, and this is the sum the Authority has included in its calculation of his\r\nabusive profit. If, instead, Mr Parker had left the bet open without adjustment\r\n(which is what he, as a person in possession of price-sensitive information, should\r\nhave done), it would have closed when the stop, at 250p, was hit, resulting in a\r\n45 loss to him of £12,625. We have concluded that the abusive profit from this action\r\nis the aggregate of the profit made and the loss saved, namely £13,500, and that\r\n52\r\nMr Parker should not benefit from the Authority s failure to include the true total\r\nin its calculation. The proper approach is to determine the difference, in monetary\r\nterms, between what would have been the result had the person concerned acted\r\nproperly, and what was the actual result.\r\n163. We deal next with the relatively uncontroversial series 5 of short bets which\r\nMr Parker placed: £250 per point on 27 February closely followed by another at\r\n£250 per point, the third at £10 per point on 28 February and the fourth at £100\r\nper point on 1 March. None of these bets should have been placed: Mr Parker\r\nwas, as we have found, then in possession of price-sensitive information and, even\r\n10 on his own case, it is impossible to accept that they formed part of a pre-existing\r\nstrategy. The shares he might have hedged had been, or were about to be, sold,\r\nthere was no change in his holding of options (and none had moved in or out of\r\nthe money over the preceding few weeks) and there was no attempt to balance any\r\nof these four short bets with corresponding long bets. Indeed, Mr Parker accepted\r\n15 that if he was guilty of market abuse at all, he could not defend these bets. The\r\ngains he made from all four of these bets must therefore be regarded as abusive\r\nprofits. The total gain was £101,992.\r\n164. The controversial area is the treatment of two straddles which Mr Parker\r\nhad placed on 19 and 25 February and whose stops he adjusted on several\r\n20 occasions, between 27 February and 4 March, before they were closed on 5 March\r\n(the long bets, automatically) and 6 March (the short bets, by his choice). On one\r\nview, these transactions led to abusive profits, in the aggregate of £61,750; on the\r\nother to a profit of only £6,250.\r\n165. The former view which was that taken by the Authority is derived from\r\n25 taking the actual gains Mr Parker obtained from the short bets, deducting the\r\nlosses he suffered on the long bets, and treating the difference as wholly abusive\r\nprofit. The lower figure of £6,250 is achieved by comparing the result of the bets\r\nhad Mr Parker done nothing by way of adjustment between 27 February and 4\r\nMarch, and the outcome he actually achieved. As in the case of the closing of Mr\r\n30 Parker s long bet, with which we have already dealt, the latter must be the correct\r\napproach. Just as he should not have adjusted his other existing bets or placed new\r\nones, so he should have taken no action with regard to these. The measure of his\r\nabusive gain must be the difference between the outcome he should have\r\nachieved, and that which actually occurred. Conceptually, it is impossible to\r\n35 conclude that a gain which Mr Parker would have made had he acted correctly\r\n(that is by doing nothing about his short bets) is nevertheless abusive. The\r\nmeasure of the abusive profits is therefore the loss saved on the long bets by the\r\nadjustment of the stops, namely £6,250.\r\n166. We have not dealt with the detailed arithmetic of the abusive profit, since\r\n40 the calculations were agreed. The figure advanced in the Authority s statement of\r\ncase was based on the aggregate of £875, £101,992 and £61,750, namely\r\n£164,617; in our view £13,500 should be substituted for £875 and £6,250 for\r\n£61,750, with the result that we determine the abusive profit at £121,742.\r\n53\r\nThe punitive element\r\n167. While identification of the abusive profit, though it may involve some\r\nelement of judgment, is a largely arithmetical process, the criteria by which the\r\namount of any additional punitive and deterrent element of a penalty should be\r\ndetermined are not well established. There are comparatively 5 few precedents,\r\nlargely because the treatment of market abuse as a civil offence began only with\r\nthe coming into force of the FSMA in December 2001. The Tribunal has\r\nconsidered only one other case involving an individual, Arif Mohammed v FSA\r\n(2005, Decision 012) to which we shall come shortly, but we were provided with\r\n10 copies of several Final Notices directed by the RDC to individuals found to have\r\ncommitted market abuse. (The Tribunal made some observations about the\r\npenalty in Davidson and Tatham, but on a hypothetical basis and that case and\r\nthis are not directly comparable.) Penalties imposed on individuals for different\r\nkinds of conduct can be a useful guide, though caution is necessary, but limited\r\n15 assistance is to be derived from cases involving corporate offenders (including\r\nPace itself), as the nature of the conduct is different and there is usually no\r\napproximation of financial resources.\r\n168. While the penalty imposed by the RDC in this case may be the starting\r\npoint if only because it has been referred to us it was common ground that we\r\n20 were not bound by it in any way, but must make our own assessment of the\r\ncorrect amount. Again, we may take into account information not available to the\r\nRDC when it made its own decision: see the FSMA section 133(3).\r\n169. It seems to us indisputable that market abuse is, in principle, a serious\r\nmatter. It has been recognised as an offence for many years. It undermines\r\n25 confidence in the financial markets, which are of particular importance in the\r\nUnited Kingdom. It is not a victimless offence, even in those cases in which\r\nidentification of the victim is difficult. We agree with the Authority s guidance to\r\nwhich we have already referred: it is wholly appropriate that the penalty for\r\nmarket abuse, in any but a trivial case, should not merely recover the abusive\r\n30 profit where that has not already been given up, but should in addition include a\r\npunitive and deterrent element.\r\n170. We have come to the conclusion that this is as serious a case of market\r\nabuse of its kind, that is the use by an individual of inside information for the\r\npurpose of personal gain, as one might imagine. Mr Parker s behaviour was\r\n35 unscrupulous: he set out to earn for himself a substantial profit at the expense of\r\nIG. We have no doubt that, armed with the information he obtained in the course\r\nof his employment, he confidently expected a large fall in the price of Pace shares\r\nand deliberately and consciously sought to gain from that information. This was\r\nnot an isolated, single episode, but a calculated course of conduct. Mr Parker was\r\n40 successful because, as we are satisfied, he is an intelligent and resourceful man\r\nwho knew exactly what the probable consequences of his actions were, and\r\nintended those consequences. He has shown no remorse, has made no attempt to\r\nreturn his profits, and has sought throughout to justify his conduct by, as we have\r\nfound, spurious means. We have considered whether he might simply not\r\n45 understand that what he did was wrong, but we are sure that is not the case he is\r\n54\r\nprofessionally qualified, and no novice in the financial markets, and the manner in\r\nwhich he gave his evidence is inconsistent with simple naivety.\r\n171. Mr Parker did not contend that, if we were to find that he had committed\r\nmarket abuse, his offence was modest, nor did he advance any mitigating\r\narguments. He did, however, say that the punitive element 5 of the penalty which\r\nhad been imposed was disproportionate, and that it was not consistent with\r\npenalties imposed in other cases. These arguments overlap, and can, we think, be\r\ndealt with together.\r\n172. It is, we think, an uncontroversial proposition that any penalty should be\r\n10 proportionate to the gravity of the offence it is designed to punish and discourage.\r\nA significant factor must be the financial advantage the person committing the\r\nabuse set out to obtain, which will not necessarily be the same as the gain actually\r\nmade or the loss actually avoided. A course of conduct designed to yield a large\r\nprofit, even if it is ultimately unsuccessful, must almost always be considered to\r\n15 be more serious than one which could only ever result in a modest gain. One\r\nproblem which arises here is that it is impossible to calculate the advantage which\r\nMr Parker set out to obtain; although he knew, as we have found, that a large fall\r\nin Pace s share price was likely, he could not predict the magnitude of the fall.\r\nOther factors which arise in this case are the facts that Mr Parker was in a position\r\n20 of trust and that his actions were calculated and repeated.\r\n173. The most obvious difficulty we encountered when considering the various\r\nprecedents to which we were referred was that there is no clear pattern: although\r\nthere is some correlation between seriousness of behaviour and size of penalty it\r\nis far from exact. Penalties ranging from £1,000 to £25,000, most inclusive of the\r\n25 recovery element, have been imposed in cases which, though in our view less\r\nserious than this, are nevertheless incidents of market abuse committed by persons\r\nin positions of trust. Of those, we will mention individually only the single case of\r\nthis kind which has previously come before the Tribunal, Arif Mohammed, in\r\nwhich the applicant made a single, small purchase of shares in a company which\r\n30 he knew was likely to be the subject of a takeover. He was employed by the\r\npotential target s auditors, and was, like Mr Parker, a chartered accountant. His\r\npurchase was relatively modest, as was his profit of £3,750 when the takeover was\r\nannounced. Like Mr Parker, he had frequently ignored his employer s share\r\ndealing rules, though there was no suggestion that any other transaction in which\r\n35 he had engaged was abusive. He showed no remorse and attempted to justify his\r\nconduct. The Tribunal upheld the RDC s imposition on him of a penalty of\r\n£10,000, less than the £15,000 the RDC had originally proposed because of the\r\napplicant s poor financial position. We are bound to say that, despite the modest\r\nvalue of the transaction and the applicant s poor financial position, we consider\r\n40 that the penalty imposed in that case was lenient, as it was in some of the other\r\ncases to which we were referred.\r\n174. In two other cases, however, much more substantial penalties were imposed.\r\nIn one, a trader (an approved person) undertook several transactions on behalf of a\r\nclient when he knew, or at least should have realised, that the client was probably\r\n45 engaged in market manipulation. He did not, it seems, stand to make any direct\r\npersonal gain. There were mitigating factors, among which was the person s loss\r\n55\r\nof a substantial annual bonus. The penalty imposed was £70,000. In the other, the\r\nperson concerned failed to prevent a serious breach of the Authority s Principles\r\nfor Businesses when he could and should have done so; again, there was no\r\nsuggestion of personal gain and there was loss of bonus. The penalty imposed was\r\n£350,000. The offenders in those two cases were professional 5 traders and they are\r\nnot directly comparable with Mr Parker.\r\n175. We have come to the conclusion that it would be wholly inappropriate to\r\nimpose, for conduct such as that we have found Mr Parker committed, no more\r\nthan a modest punitive penalty within the range of £1,000 to £25,000 we have\r\n10 mentioned. Such a penalty cannot mark the gravity of the offence; nor would it act\r\nas a sufficient deterrent to others. We have already indicated that the two higher\r\npenalties we have briefly described arise from cases which are not truly\r\ncomparable, and we intend, therefore, to adopt our own approach.\r\n176. We have mentioned the significance of the advantage Mr Parker set out to\r\n15 achieve, and the difficulty of determining its value. In such a case, we think it is\r\nlegitimate to pay heed to the advantage actually achieved, though using it only as\r\na guide. Additional factors are the repetitious and calculated nature of the conduct,\r\nthe abuse of trust, the repeated flouting of the share dealing rules, Mr Parker s\r\ncomplete (as we are satisfied) understanding of what he was doing, his persistent\r\n20 and determined attempts to conceal, or explain away, his conduct and his\r\ncomplete lack of remorse. On the other hand, we are aware of no other allegation\r\nof market abuse against Mr Parker. Taking all those factors into account, the\r\nappropriate punitive and deterrent element of the penalty in this case is, in our\r\nview, £150,000.\r\n25 177. Mr Parker said nothing about mitigation. So far as the offence itself is\r\nconcerned, it seems to us there is little he could have said. He has cooperated only\r\nsuperficially with the Authority s investigation (that is, he attended interviews but\r\nhe steadfastly denied any wrongdoing) and has made no attempt of any kind to put\r\nmatters right. Although we learnt during the course of the hearing that he had\r\n30 been declared bankrupt, on his own petition, in early April 2006, his financial\r\nposition during the period of his abusive conduct was, by his own account, very\r\ncomfortable. Mr Parker did not provide any information about the circumstances\r\nwhich led to his being declared bankrupt, despite being invited to do so, other than\r\nto say that he had not worked since he left Pace as his full time occupation had\r\n35 been that of preparing for this case, and we have no means of knowing whether,\r\non closer examination by his trustee, his financial position will prove to be poor or\r\nhis bankruptcy was designed merely as a means of giving us that impression. Mr\r\nParker did not disclose what he has done with his abusive winnings. In those\r\ncircumstances we proceed upon the basis that we have no information about Mr\r\n40 Parker s present means, while bearing in mind that they were ample at the time\r\nthe offences were committed.\r\n178. The punitive element of the penalty as it was imposed by the RDC was\r\n£146,058: that is, £300,000 less the abusive profit, as the RDC erroneously\r\nperceived it, of £153,942. The Authority, however, argued that the abusive profit\r\n45 was £164,617; if that had been the correct figure, the punitive element of the\r\naggregate penalty would amount to £135,383, and, in order not to prejudice Mr\r\n56\r\nParker, we shall assume that this was the intended amount. The Tribunal should,\r\nwe consider, be slow to increase a penalty, save in a case where the RDC has\r\nplainly misdirected itself and the penalty imposed falls substantially below a\r\nproper amount, since its doing so might otherwise act as a disincentive to the\r\nmaking of meritorious references. Although, were the issue 5 entirely at large, we\r\nmight think it appropriate to direct the Authority to impose a penalty including a\r\npunitive element of the £150,000 we have mentioned, we do not intend to make a\r\ndirection which has the effect of increasing one element of the penalty. The\r\naggregate of the abusive profit as we have determined it, of £121,742, and the\r\n10 punitive element of the penalty we have assumed is £257,125. We have concluded\r\nthat that figure should be rounded down to £250,000 but that any lesser sum\r\nwould not be adequate to mark the gravity of Mr Parker s conduct as we see it.\r\nConclusions\r\n179. Our conclusions, which are unanimous in all respects, are that:\r\n15 Mr Parker engaged in market abuse from 27 February 2002 to 4\r\nMarch 2002, by dealing in and spread betting on Pace shares;\r\nBy so doing he made an abusive profit of £121,742; and\r\nThe appropriate aggregate penalty is £250,000.\r\n180. Save that we direct the Authority to reduce the aggregate penalty\r\n20 accordingly, the reference is dismissed.\r\n181. Mr Parker had made it clear in advance of the hearing that he intended to\r\nask us to make a direction for costs in his favour, on the grounds that, he said, the\r\nAuthority s decision to impose a penalty of as much as £300,000, and the manner\r\nin which it had reached that decision, were unreasonable, to the extent that\r\n25 paragraph 13(2) of Schedule 13 to the FSMA (which enables us to direct that the\r\nAuthority pay an opposing party s costs) was engaged. We indicated at the\r\nconclusion of the hearing that we would entertain a costs application, if Mr Parker\r\nwished to make one, after this decision was released. It might help if we make it\r\nclear that, although we do not agree with the Authority in every respect, we will\r\n30 require some persuasion that it has acted unreasonably to the extent that a largely\r\nunsuccessful applicant should receive an award of costs. Mr Dutton indicated that\r\nthe Authority was unlikely to seek a direction in its favour.\r\n35\r\nCOLIN BISHOPP\r\n40 Chairman\r\nRelease Date:","tribunal_decision_category":"financial-services","tribunal_decision_decision_date":"2006-08-17"},"temporary_update_type":false},"document_type":"tax_tribunal_decision","first_published_at":"2016-12-01T16:19:10+00:00","links":{"available_translations":[{"api_path":"/api/content/tax-and-chancery-tribunal-decisions/james-parker-v-financial-services-authority","api_url":"https://www.gov.uk/api/content/tax-and-chancery-tribunal-decisions/james-parker-v-financial-services-authority","base_path":"/tax-and-chancery-tribunal-decisions/james-parker-v-financial-services-authority","content_id":"4296071a-2103-4972-848c-5a9a8a40c3dd","document_type":"tax_tribunal_decision","links":{},"locale":"en","public_updated_at":"2016-12-01T16:19:10Z","schema_name":"specialist_document","title":"James Parker v Financial Services Authority","web_url":"https://www.gov.uk/tax-and-chancery-tribunal-decisions/james-parker-v-financial-services-authority","withdrawn":false}],"finder":[{"api_path":"/api/content/tax-and-chancery-tribunal-decisions","api_url":"https://www.gov.uk/api/content/tax-and-chancery-tribunal-decisions","base_path":"/tax-and-chancery-tribunal-decisions","content_id":"632290ae-aad8-4895-b135-1e0a72a6bdeb","details":{"facets":[{"allowed_values":[{"label":"Banking","value":"banking"},{"label":"Charity","value":"charity"},{"label":"Financial Services","value":"financial-services"},{"label":"Land Registration","value":"land-registration"},{"label":"Pensions","value":"pensions"},{"label":"Tax","value":"tax"}],"display_as_result_metadata":false,"filterable":true,"key":"tribunal_decision_category","name":"Category","preposition":"categorised as","short_name":"category","type":"text"},{"display_as_result_metadata":true,"filterable":true,"key":"tribunal_decision_decision_date","name":"Release date","short_name":"Released","type":"date"}],"index_documents_in_search_engines":true,"show_metadata_block":true,"show_table_of_contents":true},"document_type":"finder","links":{},"locale":"en","public_updated_at":"2026-04-09T09:03:44Z","schema_name":"finder","title":"Tax and Chancery tribunal decisions","web_url":"https://www.gov.uk/tax-and-chancery-tribunal-decisions","withdrawn":false}],"organisations":[{"analytics_identifier":"EA73","api_path":"/api/content/government/organisations/hm-courts-and-tribunals-service","api_url":"https://www.gov.uk/api/content/government/organisations/hm-courts-and-tribunals-service","base_path":"/government/organisations/hm-courts-and-tribunals-service","content_id":"6f757605-ab8f-4b62-84e4-99f79cf085c2","details":{"acronym":"HMCTS","brand":"ministry-of-justice","default_news_image":null,"logo":{"crest":"single-identity","formatted_title":"HM Courts &