SFA to examine brokers' role in Maxwell saga

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The Independent Online
THE SECURITIES and Futures Authority, the regulator of the City's stockbroking firms, is investigating whether Goldman Sachs, the US securities house, and other brokers breached SFA rules in conducting transactions for Robert Maxwell and his companies.

The inquiry is to investigate whether the firms did enough to determine if the transactions they entered into were legitimately for clients or were circular transactions in which Maxwell bought shares in his own companies though Liechtenstein trusts.

'We are examining whether our member firms exercised the required amount of due diligence before entering into transactions,' Christopher Sharples, the SFA chairman, said. 'If member firms think that the minimum due diligence is enough, they will be wrong.'

The SFA is keen to see firms comply with the spirit of its rules as well as the exact letter.

Goldman has admitted purchasing shares in Maxwell Communication Corporation and Mirror Group Newspapers on behalf of two secretive Swiss companies and four Liechtenstein trusts. Many of these shares were bought with money from Maxwell companies and ultimately ended up in the control of Maxwell companies.

Goldman has said that it gained assurances, both oral and written, that the share purchases 'were not disclosable', as they had to be if they were for Maxwell companies. The US firm has not said who gave these assurances.

The Stock Exchange has investigated Goldman's role and concluded that it did not breach any of the exchange's rules.

The SFA has decided to look into the conduct of its member firms because it feels the scope of existing inquiries does not cover the conduct of brokers dealing in MCC and MGN shares.

The Serious Fraud Office is looking at five areas, including the support of shares in MCC, and has brought charges of theft and conspiracy to defraud against Ian and Kevin Maxwell, sons of Robert, and Larry Trachtenberg, an American businessman.

The Department of Trade and Industry has launched an investigation into the flotation of Mirror Group Newspapers, which will look into whether a false prospectus was issued for the shares.

Meanwhile, the Investment Management Regulatory Organisation has finished a highly critical report of its own regulation of three Maxwell-related companies. The Securities and Investments Board, which oversees all the regulators, said yesterday that it would publish a censored version of the report next week.

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