Securities: UK's FSA bans and fines broker over kickbacks

According to the FSA, De Biase was a cash equities broker working at TFS Derivatives Ltd (TFS) and, as part of his remuneration, was paid a proportion of the commission revenue he generated from winning broking business. Between January 2008 and September 2009 he paid GBP131,000 in kickbacks to Anjam Ahmad, a hedge fund trader at AKO Capital LLP (AKO), in return for Ahmad giving broking business to De Biase.

On 20 occasions in 2008 and 2009, Ahmad and De Biase agreed between them that a higher level of commission would be charged to AKO, using enhanced commissions (called ‘declined improvements’). This system was designed to reward exceptionally good performance on the part of the broker, but was used by Ahmad and De Biase to increase the amount of money available to them to split. The standard commission rate was 0.05% or 5bps (basis points), but on these 20 occasions the level of commission averaged 46bps. This represented an overcharge to AKO of USD739,000.

The amount of net commission retained by De Biase under this arrangement was GBP198,000. The FSA has required De Biase to disgorge this sum as well as imposing an additional penalty. Over the course of the scheme De Biase also paid Ahmad GBP131,000. This was the subject of a previous FSA Final Notice.

In determining the appropriate amount to fine De Biase, the FSA took into account his financial circumstances. De Biase’s behaviour merited the surrender of profits, plus an additional penalty element of GBP500,000 but, because this level of fine would cause De Biase serious financial hardship, the level of additional penalty has been reduced. The additional penalty element was reduced to GBP77,484 on the basis of verified evidence of financial hardship. Because De Biase agreed to settle this case at an early stage he also qualified for a 30% discount on that figure under the FSA's executive settlement procedures, reducing the additional penalty element to GBP54,239.

In a Final Notice on 22 June 2010 Anjam Saeed Ahmad was required to surrender his profits, which amounted to GBP131,000, for his role in this misconduct.

Separately, Ahmad was also sentenced to 10 months imprisonment, suspended for two years, 300 hours of unpaid work in the community and fined GBP50,000 for insider dealing.