The former chief financial officer (CFO) and former financial controller of spread betting company Worldspreads Ltd (WSL) have both been banned and fined by the Financial Conduct Authority (FCA) over claims of market abuse at the company, which went into administration after a £15m black hole was uncovered in the client money accounts
The regulator has fined Niall O’Kelly, WSL’s former CFO, £11,900 and former financial controller, Lukhvir Thind, £105,000, and permanently banned them both from performing any function related to regulated activity.
In August 2007, the holding company of WSL, Worldspreads Group (WSG), floated on the Alternative Investment Market of the London Stock Exchange. The FCA said O’Kelly was closely involved in drafting and approving the admission documentation for the flotation, which contained materially misleading information and omitted key information that investors would have needed in order to make an informed decision about the company.
The FCA also found that O’Kelly helped manage an undisclosed ‘internal hedging’ strategy at WSL using fake client trading accounts and the unauthorised use of actual client trading accounts. By doing this, he artificially inflated assets on WSG’s balance sheet.
In the annual accounts for 2010 and 2011, O’Kelly and Thind knowingly falsified critical financial information concerning WSL’s client liabilities and its cash position, which was passed to the company’s auditors, the regulator said.
This meant that material shortfalls in WSL’s client money position were concealed from investors. By 31 March 2011, these misstatements amounted to £15.9m. WSL was unable to meet this client money liability which ultimately led to the company’s collapse in 2012.
Mark Steward, FCA director of enforcement and market oversight, said: ‘Mr Thind and Mr O’Kelly deliberately and repeatedly disseminated false and misleading information relating to a publicly listed company. Their actions amounted to serious market abuse, undermining the integrity of our markets and this will not be tolerated.
‘It is to Mr Thind’s credit that he, eventually, raised concerns to the WSL board and that both he and Mr O’Kelly cooperated with our investigation and admitted market abuse.’
O’Kelly and Thind agreed to settle at an early stage of the FCA’s investigation and therefore qualified for a 30% discount. O’Kelly also provided evidence of serious financial hardship. Were it not for the discount and O’Kelly’s financial circumstances, the FCA would have fined O’Kelly £468,756 (or £328,100 adjusted for a 30% discount) and Thind £150,000.
The FCA’s final notice for O’Kelly is here.
The FCA’s final notice for Thind is here.
