The Financial Services and Markets Tribunal (FSMT) has upheld the FSA’s findings that Mr Robin Chhabra and Mr Sameer Patel committed market abuse by using inside information to carry out a series of profitable spread bets.

Mr Chhabra started working for Evolution Beeson Gregory (Evolution), a firm of stockbrokers, in 2001 – he was employed as an analyst. Evolution was the corporate broker to some of the stocks covered by Mr Chhabra including Ebookers plc (Ebookers) and Eidos plc (Eidos).

This meant that from time to time Mr Chhabra was made aware of relevant information not generally available for a short period of time so that he could analyse and be ready to comment on the information when it became public. Mr Patel, a friend of Mr Chhabra, was a frequent and experienced spread better. On three occasions between May and July 2004 Mr Patel placed a series of spread bets on Ebookers and Eidos stocks.

The FSA argued that Mr Patel placed these bets after receiving important and confidential information about forthcoming announcements relating to these companies from Mr Chhabra. It, therefore, followed that Mr Chhabra and Mr Patel had engaged in market abuse as defined in section 118(2)(a) of the Financial Services and Markets Act 2000 (FSMA).

Based on the similarities in the sequences of events leading to each of the bets and the fact that the largest profits made by Mr Patel were in respect of bets made before unscheduled and unexpected announcements, the FSMT concluded that Mr Patel did place his bets in reliance on restricted information not generally available which had been disclosed to him by Mr Chhabra.
The FSMT rejected submissions that:
(i) the safe harbour provisions applied because Mr Patel had taken a firm decision to enter into his transactions and this did not alter after receipt of the information;

(ii) the standards of behaviour to be expected of Mr Patel were not the same as the standards to be expected of a person who was used to handling inside information; and

(iii) Mr Patel did not know that the information he received from Mr Chhabra was inside information.
A separate hearing will take place to determine the action to be taken against Mr Patel and Mr Chhabra.

Read more: FSMT decision: http://www.tribunals.gov.uk/Finance/Documents/decisions/FinancialServicesMarketsTribunal/072_Chhabra_Patel.pdf.