The Financial Times reported today on the curious case of Iraj Pavazi, a stock market trader currently on trial at Southwark Crown Court. In his defence testimony he apparently admitted that he once spread false rumours about a stock to push up the share price.
The article reports that he bought all the shares in the stock of Pacific Media (a “penny” share listed on AIM) that were available and then spread a story that a Malaysian tycoon was going to reverse his business into the company. The share price then tripled. In response to a question from his barrister as to whether the rumour was true he said “No, not at all”. He also said that “In the stock market you never know if you are being told the truth or not”.
Oddly Mr Pavazi is not being prosecuted for this behaviour but is actually providing this as evidence in his defence against a charge of insider trading where he is alleged to have placed trades based on information received from a third party. He is apparently suggesting that he never questioned where his information on share tips came from, but “You assume it’s a lie and you can do your own research” he said.
It also seems that Mr Pavazi regularly exploited the press to promote stories, and that included two Financial Times journalists – “who are not accused of wrongdoing” the FT notes.
Comment: It will be interesting to see the outcome of this trial. But does it not demonstrate the low standard of behaviour now exhibited in some sections of the stock market, and particularly in those small cap AIM stocks or penny shares? Mr Pavazi has reportedly made £70m from market trading so you can see just how profitable such behaviour can be. But his legal expenses over this case will no doubt be considerable.
Would it not be worthwhile though for the Financial Conduct Authority (FCA) to look at other aspects of this case with a view to cleaning up the AIM market?