As a follow up to my last blog post on the case of Iraj Parvizi currently being heard in Southwark Crown Court, it has now transpired that he was not aware that spreading false rumours was a criminal offence.
As Mark Bentley has commented on the last article, Mr Parvizi’s comments on trading in Pacific Media appear to be an example of using “manipulating devices” [MAR 1.7.2] under the FCA Handbook regulations, which explicitly identifies “pump and dump” as a form of market abuse. It spells it out in this sentence: “pump and dump – that is, taking a long position in a qualifying investment and then disseminating misleading positive information about the qualifying investment with a view to increasing its price”.
To quote from the latest report in the FT, “Iraj Parvizi said the first he heard that spreading misleading information to induce others to invest could be market abuse was in the witness box yesterday”. He apparently said “If that’s true then the courts are going to be very busy” and “Rumours and speculation – that’s how the stock market works”.
Mr Parvizi surely shows an astonishing ignorance of the laws surrounding stock market trading. He is being prosecuted for insider trading, but it appears that he is using as a defence that he did not know the information he was trading on was true or false. It would seem his legal advisors may be just as ignorant. Let us hope that his comment that the courts are going to be very busy as a result of this disclosure are true! If nothing else, they should be considering whether Mr Parvizi may have previously committed a criminal offence in addition to the one he is currently in court for.
Readers of this blog who invest in small cap stocks should be reminded, and keep it in mind, that spreading false information about a company is a criminal offence. But I suspect most of our readers already knew this.