Evolution Beeson Gregory fined £500,000 and its former market making head pays £75,000 for distortion

Evolution Beeson Gregory (EBG), the investment banking arm of the Evolution Group, a market-maker in mid cap and small cap AIM stocks, which sold short 252% of the issued share capital of Room Service (now named Azure (Holdings) Plc) between 25 September 2003 and 21 October 2003, has paid a £500,000 penalty in the FSA’s first market abuse action for distortion. The regulator found that EBG had “no reasonable settlement plan” to meet its obligation to deliver the shares that it had sold to approximately 250 investors. It had relied on issuance of new shares in Room Service following the company’s AGM on 20 October 2003 or for the company to go into insolvency and for investors to give up on their share entitlements. In the event, no new shares were released and the company’s securities were suspended on 22 October 2003.