FSA fines ex-Pacific Continental stockbroker £24,000

17 November 2009 11:16 am | By Leah Milner

The regulator says Krilov-Harrison used inside information about an Aim-traded company to encourage his clients to buy its shares.

Pacific Continental went into administration in June 2007 and is now in liquidation. In March this year the Financial Services Compensation Scheme revealed that advisers would face an interim levy of £38m for costs in 2008/09 relating to Pacific Continental and Square Mile Securities, after Pacific was declared in default by the FSCS in January.

Krilov-Harrison received inside information on March 28 2007, that Provexis Plc, an Aim-traded company, had signed a major contract with an international food company.

The announcement was due to be released to the market in two days and the company’s share price was expected to increase as a result.

Over the course of the next 24 hours, Krilov-Harrison made three calls to clients in which he disclosed that Provexis was going to announce a major contract shortly which would make its share price ‘jump up substantially’.  

Using the inside information, he encouraged some of his clients to buy Provexis shares.

On March 30 2007, Provexis announced the new contract and its share price increased by 19.81 per cent from the closing price on the previous day.

Krilov-Harrison committed market abuse by using inside information about the announcement and the likely impact on Provexis’ share price as part of his sales tactics for persuading clients to buy shares.

The FSA found that Krilov-Harrison’s actions had been deliberate and been motivated by his desire to get a bonus.

FSA director of enforcement and financial crime Margaret Cole says: “Anyone who uses inside information to encourage their clients to buy shares is abusing their privileged position and cheating other honest investors.

“This is plainly wrong. Market participants must ensure they do not pass inside information to their clients in these circumstances.”

In determining the appropriate amount to fine Krilov-Harrison, the FSA took into account the poor regulatory and compliance culture at PCS as well as his financial circumstances.

He also settled at an early stage of the investigation and received a 20 per cent discount.  

In January the FSA banned former chief executive of Pacific Continental Securities Steven Griggs, and former finance director, Charles Weston, and also fined them £80,000 and £95,000 respectively for serious failures in the company which led to customers buying high risk shares without suitable advice.

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