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FSA fines stockbroker for allowing insider dealing

The FSA has fined a former stockbroker £20,000 for failing to prevent a suspicious client from insider dealing.

The regulator has fined Mark Lockwood, a former trading desk manager at a retail stockbroking firm, £20,000 for failing to observe proper standards of market conduct.

The FSA says Lockwood failed to identify and act on a suspicious client order that allowed the firm to be used to facilitate insider dealing. As a result of the regulatory failings Lockwood’s firm failed to identify the trade as suspicious and failed to report it to the FSA.

The client sold shares in oil and gas exploration company Amerisur on May 23 2007, ahead of an announcement by the company of a placing of shares the next day. The client has also been subject to separate FSA enforcement action for market abuse in relation to Amerisur shares.

Lockwood failed to identify that the transaction was being conducted on the basis of inside information, despite his own knowledge of the impending transaction and clear warning signals from the client. He failed to prevent the trade or alert his firm to the possibility that the trade was being conducted on the basis of inside information. The illegal trading only came to light because of a report submitted by another broker.

FSA director of enforcement division Margaret Cole says: “This fine emphasises the importance of the Suspicious Transaction Reporting regime.

“Tackling market abuse and insider dealing is not just an issue for the regulator. Broking firms are the front line of defence against people who seek to misuse and profit from their possession of privileged information.

“Lockwood’s failure could have meant that this incident went undetected and unpunished. Approved persons should be in no doubt as to their responsibilities in this area and the FSA will not hesitate to take action where they fall down on these.”

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  1. Credibility
    Without knowing exactly why Mark Lockwood should have viewed the transaction as ‘Suspicious’ we have to accept the FSA’s word on this, BUT who is doing anything about the client? Surely pursuing the client and proving that he was indeed dealing on ‘Insider’ information is more to the point and anyway if Mr Lockwood already knew, presumably from other sources, about the additional share placing, was it indeed ‘Insider Dealing’? Sounds as if the information was already in the public domain!

    The problem I have with this type of situation is the lack of confidence there is in the ‘competence and capability’ of the FSA, not just in doing it’s basic job but also in it’s competence in being Prosecutor, Judge and Enforcer, without any proper oversight.

    The FSA has already lost all credibility in the eyes of the ‘Adviser Community’, probably because it appears to be on a crusade to portray most IFA’s and Brokers as incompetent and also because it appears to condone the much wider and more serious abuse of product providers.

    I find it galling that the FSA has the effrontery to accuse anyone of ‘a lack of competence and capability’ when it has been proven to be so incompetent itself and then to just shrug it’s collective shoulder and say that because it did not understand the situation it didn’t have the right people or systems in place to regulate properly. The right way to act would have been for the
    FSA to put it’s own house in order first, not to throw it’s weight around trying to put up a smoke screen in front of it’s own failings.

    A better way to regain some respect would be to start treating ALL regulated firms on the same level of the playing field, proportionate to those firms importance to the market as a whole.

    Obviously pure providers will have different regulations from ‘Advisers’. The problem is when those providers ‘Sell’ or ‘Advise on’ their own Products. This is where the perceived different standards come in.

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