The UK's Financial Conduct Authority has banned and imposed financial penalties on two former employees of Worldspreads Ltd, which operated a spread-betting business before it collapsed in March 2012.

The regulator has fined WSL’s former chief financial officer, Niall O’Kelly, £11,900 and its former financial controller, Lukhvir Thind, £105,000, for engaging in market abuse and has banned them both from performing any function related to regulated activity at any time in the future.

In August 2007, the holding company of WSL, Worldspreads Group, was floated on the Alternative Investment Market of the London Stock Exchange. O’Kelly was closely involved in drafting and approving the admission documentation for the flotation, which contained materially misleading information and omitted information that investors would have needed if they wanted to make an informed decision about the company.

The FCA also found that O’Kelly helped manage an undisclosed ‘internal hedging’ strategy at WSL using fake client trading accounts and the unauthorised use of actual client trading accounts. By doing this, he artificially inflated assets on Worldspreads Group’s balance sheet.

In the annual accounts for 2010 and 2011, O’Kelly and Thind knowingly falsified crucial financial information concerning WSL’s client liabilities and its cash position, which they passed to the company’s auditors. This concealed shortfalls in WSL’s 'client money' position from investors. By 31 March 2011, these misstatements amounted to £15.9 million. WSL was unable to meet this client money liability which ultimately led to WSL’s collapse in 2012.

Eventually and belatedly, Thind confessed all to the WSL board and both men agreed to settle at an early stage of the FCA’s investigation, thereby qualifying for a 30% discount in their fines. O’Kelly provided evidence of serious financial hardship. Were it not for this, and for the discount, the FCA would have fined O’Kelly £468,756 and Thind £150,000. It is not pressing criminal charges.