FSA fines Robert Bonnier 290,000 and Indigo Capital 65,000 for market abuse

Mr Bonnier made twelve inaccurate notifications to Regus plc (Regus), from 18 November 2002 to 8 January 2003, relating to dealings in Regus' shares. The notifications purported to show that Indigo had shareholdings in Regus, in fact Indigo mainly held contracts for difference (CFDs) referenced to Regus' shares and not Regus shares. The notifications were subsequently announced to the market by Regus.

Andrew Procter, Director of Enforcement at the FSA, said:

"The repeated actions of Mr Bonnier, an experienced market practitioner, and Indigo's failure adequately to oversee his activities, fall far short of the standards the FSA expects.

"The smooth operation of the financial markets relies on the provision of accurate information to enable participants to make reasoned investment decisions about a company's shares. The announcements made by Regus, which were based exclusively on the notifications made by Mr Bonnier, were a substantive source of information for the market in Regus' shares. In providing inaccurate information Mr Bonnier created a false and misleading impression as to the supply of, demand for, or the price or value of Regus' shares.

"Investors need to have confidence in the integrity of the processes by which shares are traded on the market and that information disclosed to the market is accurate."

Bonnier and Indigo's Actions

Mr Bonnier was a managing partner of Indigo with sole responsibility for Indigo's proprietary investment including compliance with statutory reporting requirements.

Mr Bonnier, on Indigo's behalf, traded in Regus' shares and CFDs referenced to Regus' shares. The majority of the CFD purchases during the period covered were made from Cantor Fitzgerald Europe Limited (Cantors) whose standard terms of business for CFDs meant that Cantors retained ownership, including voting rights, of all shares bought to hedge its CFD position.

During this period Mr Bonnier made 12 inaccurate notifications to Regus informing them that Indigo had bought Regus' shares. The notifications indicated that Indigo's shareholding in Regus was steadily increasing, ranging from 3.51% on 18 November 2002 to 15.12% on 6 January 2003 with a final holding of 12.8% notified on 8 January 2003. In fact the notifications related to the size of Indigo's CFD holdings and not actual shares. Regus in turn disclosed the notifications to the market as required under Listing Rule 9.11. However, during the relevant period Indigo's shareholding in Regus continually decreased and never amounted to more than 2.30% and on 8 January 2003 was nil.

The Panel on Takeovers and Mergers (Panel) had a number of discussions with Mr Bonnier and Indigo between 3 January and 9 January 2003 in relation to apparent stake building by Indigo in Regus. This resulted in Indigo, at the Panel's request, issuing on 7 January 2003 a statement that it was exploring a number of options with Regus' board, including a possible takeover.

Indigo was again asked on 9 January 2003, by the Panel, to make a statement clarifying its own position in relation to Regus. This statement confirmed that Indigo had a beneficial interest in 0.12% of the issued share capital of Regus; in fact Indigo's actual shareholding at this time was nil.

Mr Bonnier's behaviour was serious in that:

• inaccurate notifications were made on 12 occasions;

• the notifications were misleading to the market and they did not accurately state the number of shares held; and

• at no time during this period did Mr Bonnier adequately clarify the nature of Indigo's interest in Regus' shares, even when requested to do so by Regus' registrar on 13 December 2002.

Notes for editors

1. The full text of the Final Notice, dated 17 December 2004, is available on our website. This includes the background to the case, the relevant statutory provisions and the regulatory requirements contravened and the factors taken into account by the RDC when setting the level of the fine.

2. Financial penalties are not treated as income by the FSA. They are applied for the benefit of authorised persons (or the issuers of securities admitted to the official list) as appropriate, and so given back to the industry in subsequent years.

3. Robert Bonnier - Mr Bonnier became a director of Indigo in 1999, a managing director in January 2002, and a full time managing partner in July 2002, having been previously a capital investor since Indigo's incorporation in February 1999. Mr Bonnier resigned his position in Indigo and sold his shareholding in September 2003.

4. Indigo Capital - Indigo is a limited liability company incorporated in New York, USA. Historically, Indigo's business involved the provision of financial advisory services and the facilitation of capital investment to companies based in North and Latin America.

5. Regus - A public company listed by the FSA and traded on the London Stock Exchange since October 2000. It is a multi-national organisation whose core business is the provision of managed office space. Between 18 November 2002 and 8 January 2003 (the Relevant Period) Regus had a market capitalisation of between 23 million and 144 million.

6. Cantors - The majority of the CFD purchases during the Relevant Period were made from Cantors whose standard terms of business during the Relevant Period for CFDs stated that Cantors retained the ownership and voting rights of any shares bought to hedge its position. As the owners of Regus' shares purchased to hedge the CFD positions Cantors were required to and did make notifications to Regus.

7. Contracts for Difference (CFDs) - A CFD is a contract under which one party agrees to pay the difference between the opening value and the closing value of an underlying instrument or index. Through a CFD a person may have economic exposure to the price of a share without purchasing the share itself. A CFD does not itself transfer any voting rights or beneficial interest in any underlying shares to which the CFD is referenced, unless explicitly agreed with the provider.

8. Disclosure of Shareholdings - Under sections 198-202 of the Companies Act 1985 anyone acquiring an interest in 3% or more of a listed company's issued share capital must notify this to the company who, under the Listing Rules, is then required to disclose this fact to the market. The acquisition of CFDs referenced to listed issuers' shares does not give rise to a disclosable interest under the Companies Act 1985.

9. Panel on Takeovers and Mergers - The Panel is the regulatory body which administers the City Code on Takeovers and Mergers and the Rules governing Acquisitions of Shares. The Panel's main objective is to ensure equality of treatment and opportunity for all shareholders in takeover bids.

10. The market abuse regime was first introduced by the Financial Services and Markets Act and applies to conduct on or after 1 December 2001. Under the Act the FSA has power to impose financial penalties for market abuse, which is defined as one of three types of behaviour:

    • Misuse of information (previous cases include Peter Bracken, Robert Middlemiss and Michael Davies)

    • Misleading statements and impressions (Shell)

    • Market distortion (EBG & Potts)

    The proceedings in this case relate to the second category of behaviour misleading statements and impressions; this involves making information available that is likely to give a false or misleading impression about the supply or demand, or price or value of an investment.

11. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.

12. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.