Top shareholder body backs under-fire Burford's legal action over ‘spoofing’

ShareSoc — a body which protects individual investors — said Burford is right to take its own legal action to find out who may have manipulated its stock, claiming the Financial Conduct Authority lacks the firepower and has no track record of prosecutions when it comes to so-called “spoofing and layering”.

Earlier this week Burford launched legal action against the LSE, asking the exchange to release the names of traders who allegedly cancelled large sell orders on August 6 and 7 when it came under a short attack by Muddy, led by Carson Block.

The LSE has made clear it thinks the matter is for the FCA.

Paul de Gruchy, a director at ShareSoc, said: “Prosecutions for spoofing shares are pretty non-existent in the UK. The LSE think that any investigation should be led by the FCA, who lack resources and have a track record of not bringing prosecutions in this area.”

ShareSoc added that the LSE finds itself in an awkward situation as Burford claims to have uncovered widespread illegality on the platform and the body has suggested that this might not be the first time it has happened.

De Gruchy added: “It seems quite possible that this is the tip of the iceberg. If there was layering and spoofing, then is it likely it is the first time it has happened? Or is it happening systematically, and this is the first time that someone with the budget and tenacity to investigate has become involved? Is the regulation ignored by a swathe of market participants.”

ShareSoc has even called on private investors to lobby their MP in order to uncover whether there is widespread manipulation on the LSE.

Traders can spoof the market by placing a high volume of sell orders into the market at a price below the offer price and then cancel the trade. Repeatedly doing this drives down the share price and the activity is illegal.