France’s market regulator has handed out the largest fine in its history to a trader who made €6.2m from insider trading, as the watchdog joins those in the US, UK and Japan taking a tougher line on financial crimes.
Joseph Raad “an experienced financier and regular investor” was passed information about the imminent takeover of logistics company Geodis by SNCF, the French state railway, in 2008 by his cousin Charles Rosier, a UBS banker at the time close to the deal, according to the Autorité des Marchés Financiers.
Mr Raad purchased €8m worth of shares and options in Geodis in a two-week period just before the announcement of the bid, said the AMF, following his cousin’s meeting with a senior person at UBS with knowledge of the deal.
“The commission stresses that the acquisitions made by Joseph Raad were both atypical and very risky, given the downward trend and low liquidity of Geodis,” said the regulator.
“The conclusion therefore is that, from the date they were initiated, the trades can only be explained by his certainty that the price would rise,” it continued.
The trader was today fined €14m for insider trading while his cousin, Mr Rosier, was fined €400,000 for passing on privileged information. Neither parties could be reached for comment.
The previous largest fine handed out by the AMF was earlier this year when luxury goods group LVMH was fined €8m for failing to properly disclose its stakebuilding in rival luxury goods group Hermès before 2010.
The rulings come as regulators around the world toughen their stance on market abuse in the wake of the financial crisis in 2008 and the waves of subsequent scandals over Libor and currency market manipulation.
France toughened up the powers of its regulator two years ago, raising the maximum fine available to the AMF from €10m to €100m, or 10 times any profits earned, as long as the crime was committed after October 2010.
Global regulators were given a jolt by the Libor scandal in particular. Tom Hayes, a former star trader at both UBS and Citigroup, has become the first banker to go to court over the issue, but billions of fines have been handed out to banks.
Last week the Hong Kong Monetary Authority joined the UK investigating alleged manipulation of foreign exchange markets, becoming the first Asian authority to say publicly that it is undertaking such inquiries.
Justifying the size of the fine today, the AMF said that transmission of privileged information by Mr Rosier was “particularly serious” given his senior role at the bank.
The AMF added that Mr Raad was a professional trader, and therefore should have been aware about the rules on insider trading, also pointing to the scale of the profit made at €6.2m.
The most dramatic French financial fraud case in recent years has been Jérôme Kerviel, a rogue trader at Société Générale found guilty three years ago after amassing €50bn in unauthorised trades in 2008.
He was sentenced to three years in prison and ordered to pay €4.9bn in damages for taking risks that could have led to the collapse of his former employer.