Entrepreneur cleared of market abuse

Paul Davidson, the former pipe-fitter turned entrepreneur known as The Plumber, emerged triumphant from his long legal battle with the Financial Services Authority when a tribunal yesterday cleared him of market abuse.

Mr Davidson had challenged the FSA’s decision to fine him £750,000 as a result of the events surrounding the flotation of a tiny private biotechnology company called Cyprotex, on Aim, London’s small companies stock market, in 2002.

The flotation became controversial after a £5m spread bet was placed with City Index, the spread betting firm, on the company, in which Mr Davidson was a shareholder.

Ashley Tatham, a former director at City Index, also challenged the agency’s intention to impose a £100,000 penalty as a result of the same events. He too was cleared by the Financial Services and Markets tribunal yesterday.

“We conclude that the applicants did not engage in market abuse,” said the three-person tribunal, which heard evidence over 23 days earlier this year. As far as Mr Davidson is concerned, we conclude that, on the evidence before us, the authority has not discharged the burden of proving to us, to the requisite degree of probability, that Mr Davidson either created, or took part in, the scheme or arrangement to facilitate the flotation of Cyprotex,” it said.

The panel was satisfied that Mr Tatham had neither created nor taken part in the scheme or arrangement “and all he did was to effect a spread bet in the normal course of his business”.

The case has been an em-barrassment to the FSA. Challenges by the two men over its preliminary findings of market abuse had been due to be heard in 2004. But the tribunal had to be dissolved after one member discussed the case with a neighbour who headed the FSA’s regulatory decisions committee. The matter was finally heard by the FSMT between January and March this year.

Last night the agency said only that it was “a long and complicated judgment which is being studied”. The FSA has the option to appeal.

Mr Davidson, celebrating in a Cheshire pub, said it was “nice to be vindicated” and accused the agency of behaving “appallingly” throughout the four-year battle. He planned to be in contact with the FSA today over some form of compensatory settlement, claiming: “They did everything they could to ruin me.”

Mr Tatham was “hugely relieved”, but said the case should never have been brought. “It was a very unfair fight, and now I’m looking to rebuild my career,” he said.

He added it appeared unclear legally what ex-penses, if any, might now be borne by the FSA, but estimated that the agency’s own costs at millions of pounds.

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