15 May 2020

Burford Capital loses fight to force London Stock Exchange to hand over confidential trading data

London's High Court: Burford Capital's unprecedented claim was rejected by the Commercial Court

Commercial Court judge rejects market manipulation claims and says attack on exchange was 'unjustified'

Litigation funder Burford Capital has conceded defeat in an unprecedented battle with the London Stock Exchange (LSE) after the High Court rejected its application for the LSE to hand over confidential trading information.

Burford  was seeking the identities of market participants trading in its shares in a bid to prove that its share price had been illegally manipulated during a sell-off that occurred after a heavily critical research report by hedge fund Muddy Waters last August.

Commercial Court judge Mr Justice Andrew Baker ruled there was not a clear case of wrongdoing and dismissed Burford’s ‘highly critical attack on the motivations and competence of the Stock Exchange and the Financial Conduct Authority (FCA)’, saying it was unjustified. 

In the first case of its kind brought against a UK stock market, Burford had engaged Professor Joshua Mitts of Columbia University to argue that ‘market manipulation in the form of spoofing and layering caused an artificial decline in Burford’s share price’. 

Mr Justice Baker disagreed, saying: ‘In my judgement … it is impossible to determine from the data Professor Mitts reviewed whether any [trading events] were or may have been manipulative.’

He added: ‘On no view is there a clear case of wrongdoing; and there would be a strong likelihood that Burford would find it could not in fact put forward any actual allegation of wrongdoing at all.’

He went on to say that on public policy grounds, there would have been a ‘risk of damage to public confidence in the FCA as regulator’, were he to grant the order sought, which would also risk ‘significant collateral damage to many innocent parties’. 

He concluded that the ‘the scales are in my view heavily tipped against Burford overall’.

Burford said that without the data it was “unfortunately not in a position to advance shareholder claims further”. “There is also a limit to the level of effort that it is sensible and appropriate to expend, and thus Burford does not intend to appeal,” it added.

Bryan Cave Leighton Paisner partner Andrew Tuson, which acted for the LSE, said: “The court found that, even if there had been evidence of market manipulation, justice would not have required disclosure of the identities of market participants’ confidential trading data in this case.”

Brick Court’s Jasbir Dhillon QC, and Jonathan Dawid appeared for Burford, instructed by Richard East of Quinn Emanuel; the LSE were represented by Blackstone Chambers’ Andrew Green QC, Thomas de la Mare QC and Harry Adamson.

The claims sought an order under the High Court’s Norwich Pharmacal jurisdiction, which required a ‘good arguable case’ to allow disclosure. It was heard, remotely, in London’s fast-track Financial List, under the Covid-19 protocol, before Mr Justice Andrew Baker, in April.

Muddy Waters launched another attack against Burford earlier this week when it accused it of over-stating its profits in its 2019 financial results.

Burford declined to comment, but has previously firmly rejected criticisms made against it.

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