17 April 2010
Robin Chhabra & Sameer Patel Vs. The Financial Services Authority (“the FSA”)
Response to Decision By The Financial Services & Markets Tribunal (“the Tribunal”)
In its decision published on 11 January 2010, the Tribunal has found on the balance of probabilities that Mr Chhabra, whilst an
analyst at Evolution Securities, passed price sensitive information to Mr Patel, an experienced spread bettor.
Mr Chhabra and Mr Patel maintain they did not engage in market abuse.
Despite having investigated the matter for nearly 5 years, the FSA failed to produce any firm evidence to support their case.
The evidence against Mr Patel and Mr Chhabra is circumstantial, and exists alongside other evidence which suggests the contrary.
Not one email, phone call recording, witness statement or evidence of financial dealings between Mr Chhabra and Mr Patel has
been produced which bears out the FSA’s view.
Mr Patel was a prolific trader especially in the stocks concerned. He provided evidence to the FSA that he had legitimate reasons
to bet on these stocks in the direction, the size and at the time he did. The Tribunal itself accepted that some of the characteristics
of these bets were consistent with Mr Patel’s general trading strategy. The FSA also inferred that Mr Chhabra was in possession of
price sensitive information when Mr Patel placed his bets when much of the evidence suggested otherwise.
Furthermore the FSA and the Tribunal have reached their decisions even after accepting that Mr Chhabra did not benefit financially
from Mr Patel’s trading. Mr Chhabra had no reason to jeopardise his reputation and career by behaving in the way that the FSA
allege.
With less than a week before the hearing before the Tribunal to determine penalty, the FSA petitioned the Tribunal to more than
double the penalty that the FSA themselves had originally decided. By proceeding to the penalty hearing, Mr Chhabra and Mr Patel
would have exposed themselves to intolerable financial risk in addition to the penalties originally proposed. The FSA has now
accepted that the original penalties stand, but only in return for Mr Chhabra and Mr Patel giving up their statutory right to appeal.
The effect of this tactic is to undermine the fairness of the Tribunal process. This will discourage potentially meritorious applicants
taking their cases to the Tribunal in the future. Applicants could face the jeopardy of the FSA petitioning for a higher fine than
originally imposed if they proceeded to defend themselves.
The financial markets are characterised by large numbers of participants who carry out vast numbers of trades for a huge variety
of reasons. There are bound to be numerous instances of potentially suspicious but innocent trading and it is incumbent on the
authorities to look at all the facts rather than only those that support their case.
Mr Patel and Mr Chhabra accept that Market Abuse must be eliminated. The FSA has been given extraordinary powers to do so. It
is rule maker, investigator and a prosecuting authority. It can levy massive fines and deprive people of their livelihoods by
prohibiting people from working in the financial services industry and can do so by proving cases only on a balance of probability
rather than to the criminal standard. It is therefore vital that it conducts its activities with objectivity commensurate with these
powers.
