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Corporate finance adviser banned and fined £150,000

Margaret Cole

The FSA has banned a corporate finance adviser from working in regulated financial services and fined him £150,000 for engaging in market abuse.

The regulator was directed to take the action against Zimmerman Adams International corporate finance executive David Massey by the Upper Tribunal (Tax and Chancery Chamber).

On November 1 2007, Massey short sold 2.5 million shares of Eicom, the then AIM-listed digital broadcaster, at 8p per share on the basis of the inside information that Eicom was intending to issue new shares at 3.5p per share.

Within minutes he accepted an offer to subscribe for 2.6million newly issued Eicom shares at 3.5p and used the shares he obtained to close his short position, making a net profit of over £100,000.

Massey had also occasionally acted as a financial PR consultant for Eicom for approximately five years, sometimes receiving payment from Eicom for his services.

In and after June 2007 Eicom was in discussion with Massey about its need for further funds for a possible acquisition. At the time of his short sale of Eicom shares, Massey knew that Eicom was prepared to issue up to 3million shares to him at a substantial discount.

Following the trading, Massey initially tried to book the transaction to the account of an associate and, when questioned about the deal by Zimmerman Adams International and its compliance advisors, he gave the impression that he hardly knew Eicom.

FSA managing director of the enforcement and financial crime Margaret Cole (pictured) says:“Massey’s actions were unacceptable. He abused his position as an FSA approved person by acting in a personal capacity and failing to inform the buyer that they would be buying new shares issued at a significant discount to the market price, keeping all the profit for himself.  

“Massey used the trust invested in him by both parties to create the opportunity to trade on the basis of inside information and he distorted the truth to hide his actions, profiting at the expense of other market users. This type of conduct threatens the integrity of the market and will not be tolerated by the FSA.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Stupid and greedy – hardly surprising he was caught!

    The industry is clearly better off without him

  2. Economically irrational behaviour by Massey? He didn’t challenge the prohibition order terms, so at least to some degree he accepted he was in the wrong throughout.

    So let’s do themath on the fine. The FSA proposed £281,474; take off 30% for early settlement gives you £197,032. He took the case to Tribunal and ultimately got stuck with £150,000 – so, if the case cost him more than 47 grand, it wasn’t worth fighting. The case report shows he was legally represeneted, and that the hearing lasted at least four days, so it’s a safe bet he would’ve been better off just sucking it up in the first place and saying “fair cop, guv”.

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