Upper Tribunal Tax and Chancery Chamber

UT (Tax & Chancery) UT-2022-000134 UT-2022-000135 UT-2022-000137 - [2025] UKUT 00214 (TCC)

Fecha: 31-Ene-2025

Step 2

Step 2

900.

The figure at Step 2 will be the greater of a figure based on “relevant income”, a profit multiple, and, for market abuse cases which the Authority assesses to be seriousness level 4 or 5, £100,000.

901.

The relevant period for calculating Mr Sheth’s relevant income is the 12-month period from 30 July 2015 to 29 July 2016, and his relevant income for that period was £82,478.

902.

Mr Bailin referred to DEPP 6.5C.2.2, which provides that the minimum penalty “for market abuse cases which the [Authority] assesses to be seriousness level 4 or 5, £100,000. The [Authority] usually expects to assess market abuse cases committed deliberately as seriousness level 4 or 5”. Mr Bailin submitted:

(1)

DEPP also acknowledges that level 4 will not be appropriate in every case of deliberate market abuse, and those factors must be weighed against other factors. DEPP 6.5C contains a list of level 1, 2 and 3 factors, the presence of which in Mr Sheth’s case tend to indicate that his case should have been assessed as level 3 seriousness, namely:

(a)

little, or no, profits were made or losses avoided as a result of the market abuse, either directly or indirectly; and

(b)

there was no, or limited, actual or potential effect on the orderliness of, or confidence in, markets as a result of the market abuse.

(2)

The consequences for Mr Sheth in the Step 2 figure being assessed at level 4 has meant that the minimum penalty of £100,000 has been engaged; yet had his penalty been calculated based on level 4 at 30% seriousness, the penalty would have been £24,843 (being 30% of £82,478). The penalty of £100,000 is disproportionate compared to the penalties imposed on Mr Urra and Mr Lopez by reference to their relevant income. Mr Sheth was the junior trader on the Desk and this is not just and fair.

(3)

There are good and appropriate reasons to follow DEPP 6.5C in principle but to depart from it so as to ensure the penalty is fair and just, namely through the application of a percentage of income based approach. To not do so produces disproportionate consequences for Mr Sheth.

(4)

Alternatively, the Tribunal could find that the disproportionate consequences stem from the assessment of Mr Sheth’s conduct at level 4, the same level as that assessed for the other Traders. This takes no account of his more junior status, that he did not cause or encourage others to commit market abuse, he did not occupy a prominent position in the market, he was not an experienced industry professional and he did not hold a senior position at MHI. If the conduct had been found to be level 3 seriousness, the penalty would have been calculated based on a percentage of Mr Sheth’s relevant income.

903.

We have found that Mr Sheth’s conduct was deliberate and dishonest. Whilst we accept that the identified level 1, 2 and 3 factors are present, the Tribunal does not consider that the seriousness could be less than level 4 where conduct is deliberate and dishonest, notwithstanding that Mr Sheth was the more junior trader.

904.

If the Tribunal were to apply the approach in DEPP without any adjustments, the Step 2 figure would then be, as calculated by the Authority, the higher of (i) 30% of Mr Sheth’s relevant income of £82,478, ie £24,743, (ii) a profit multiple of 3 applied to his financial benefit of £0, ie £0, and (iii) £100,000.

905.

The Tribunal recognises that the minimum penalty of £100,000 assists with the promotion of the Authority’s policy to promote high standards of regulatory and/or market conduct by deterring persons who have committed breaches from committing further breaches, helping to deter other persons from committing similar breaches and demonstrating generally the benefits of compliant behaviour. The Tribunal accepts and agrees that a penalty of £24,743 may not be seen as being of sufficient magnitude for this purpose.

906.

Addressing Mr Bailin’s submissions by reference to the penalties assessed on Mr Urra and Mr Lopez, their relevant income is £744,800 and £143,089 respectively, and we have determined that it will be appropriate for the Authority to impose financial penalties of £223,440 and £100,000 respectively. We do accept that, by reference to relevant income, imposing a penalty of £100,000 on Mr Sheth would be disproportionate to those imposed on Mr Urra and Mr Lopez, and that this is not fair or just. We do not, for this purpose, put any weight on Mr Sheth’s junior status, his relative experience, or their respective roles at MHI; we have found that all three Traders committed market abuse and that their conduct was dishonest. We have decided that it would be appropriate to calculate the Step 2 figure by reference to the proportion which Mr Sheth’s relevant income bears to that of Mr Lopez and to apply that percentage to the amount determined for Mr Lopez at Step 2. This results in a Step 2 figure for Mr Sheth of £57,641 (£82,478/£143,089 x £100,000). This remains imperfect, including by reference to the relevant income of Mr Urra; but we consider that it pays due regard to the Authority’s approach that the figure at Step 2 should not necessarily be limited to 30% of relevant income where the market abuse has been assessed as level 4 seriousness.

907.

Step 2 is therefore £57,641.

Step 3

908.

The Tribunal considers that there are no aggravating or mitigating factors such as to justify an adjustment to the Step 2 figure. Step 3 is therefore £57,641.

Step 4

909.

We consider that the figure of £57,641 is sufficient to deter Mr Sheth, and others, from committing further or similar abuse. We do not increase the penalty at Step 4.