Financial Services Authority v Da Vinci Invest Ltd & Ors

For interim relief under section 381 of the Financial Services and Markets Act 2000, the court need not finally establish market abuse. It is sufficient to assess whether the evidence gives rise to a reasonable likelihood that the defendants will engage in market abuse. Freezing relief requires evidence that the defendants may have been engaged in market abuse and are reasonably likely to dispose of or deal with their assets. Behaviour involving transactions or orders capable of creating a false or misleading impression as to supply, demand or price may fall within section 118(5), subject to the statutory qualifications.

The Financial Services Authority sought continuation until trial of freezing orders previously made against the first three defendants. It also sought injunctions under section 381(1) of the Financial Services and Markets Act 2000 restraining all five defendants from engaging in market abuse.

The application concerned alleged manipulative trading in contracts for differences and other investments. The defendants disputed that the conduct constituted market abuse and contended that there was no reasonable likelihood of repetition. The central issues were whether interim evidence supported a reasonable likelihood of future market abuse and whether the statutory conditions for continuing the freezing orders were met.

1. Market-abuse injunctions. The court granted relief under section 381(1) of the Financial Services and Markets Act 2000 against all five defendants. The evidence gave rise to a reasonable likelihood that each defendant would engage in market abuse if restrained relief were refused.
2. Interim assessment. The FSA’s evidence provided a strong case that the past trading involved behaviour within section 118(5), including transactions or orders likely to create a false or misleading impression as to supply, demand or price. The court did not need to determine definitively whether market abuse had occurred. That issue remained for trial.
3. The defendants’ denial of an intention to manipulate the market did not displace the interim conclusion, particularly since no defendant had served evidence in opposition and the available evidence indicated an intention to manipulate. The resumption of trading after the termination of a prior trading arrangement materially supported the conclusion that trading might be resumed without an injunction.
4. Freezing orders. The orders against the first, second and third defendants were continued until trial. The court was satisfied that those defendants may have been engaged in market abuse for the purposes of section 381(3), and that they were reasonably likely to dispose of or otherwise deal with their assets for the purposes of section 381(4).
5. The proposed transfer of money to New York was not determined at the hearing. The defendants were left to pursue that issue in correspondence, with liberty to refer it back to the court if agreement could not be reached.