In 2003, the London office of the investment bank and security trading group based in the Netherlands, ABN Amro, received a fine of £900,000.00 for helping a US client to rig share prices.
The Financial Services Authority (who are now the Competition and Markets Authority) imposed the £900,000.00 fine after discovering that the Dutch investment bank had allowed for the prices of the US companies shares to be increased. This reportedly happened on three separate occasions over a six month period between April and October 1998.
It seems clear that the share price fixing was done in order to make the prices of the shares look better. This isn’t a new concept, and is one that still happens today. It is, understandably, against regulations.
The US investor involved was Oechsle International Advisor. Oechsle fund manager, Andrew Parlin, and head of ABN’s international trading desk in New York, Angelo Iannone, reportedly agreed that they would raise the share prices on three specific days over the six month period; the shares being in Carlton Communication, British Biotech, Volkswagen, and Metro.
A further fine was issued to Michael Acker, the then joint head of equity trading desk, for the amount of £70,000.00 for market misconduct.
A ‘serious abuse’
This was seen as a ‘serious abuse’ by Carol Sergeant, the managing director of Financial Service Authority; and rightly so. She said:
“Trading in stocks simply to move the market price is a serious abuse: it distorts market forces and undermines investors’ confidence in the integrity of the prices quoted on exchanges.”
The outcome of the investigations in to the scandal
ABN Amro as a company were fined £900,000.00, which was one of the biggest that the Financial Services Authority had ever given. The fine would have been £1.25 million if it were not for ABN agreeing to cooperate with the Financial Services Authority.
Also, as referenced above, Michael Acker, who was the joint head of equity at the time the rig sharing in prices took place, received a £70,000.00 fine.
A clear breach of competition law
ABN Amro breached competition law by making arrangements that distorted competition by making shares that they increased the price of look better for their client’s portfolios. This would then have affected trading within the UK and EU.
By making the agreement to change the share prices, the agreement would have affected the selling and purchasing price. These types of agreements are not allowed to take place as they can clearly distort competition, which is against the interests of the consumers, and often serves only to financially benefit the perpetrators involved.
Further, the behaviour exhibited by the company in changing the prices of specific shares can be seen as discriminatory pricing, which can again be a breach of competition law.