FSA Fines Former Pacific Continental Broker $40,000 (Update2)
By Joseph Heaven and Caroline Binham
Nov. 17 (Bloomberg) -- A former Pacific Continental Securities UK Ltd. stockbroker was fined 24,000 pounds ($40,000) by Britain’s financial regulator for encouraging clients to trade on information that wasn’t public.
Alexei Krilov-Harrison, 34, found out that Provexis Plc had signed an important contract in March 2007 and told clients to buy shares before the deal was announced, the Financial Services Authority said in a statement today. He was motivated by getting a bonus, the FSA said.
This is the second FSA fine this month that cited risky bonus structures. U.K. lawmakers are trying to crack down on bonuses that encouraged excessive risk-taking, which they say contributed to the worst financial crisis in a generation. The FSA has examined U.K. banks’ contracts this month to make sure they comply with its new bonus code.
“Anyone who uses inside information to encourage their clients to buy shares is abusing their privileged position and cheating other honest investors,” Margaret Cole, the FSA’s director of enforcement, said in the statement. “This is plainly wrong.”
A message left with Emma Lipscombe, Krilov-Harrison’s lawyer at London-based Hughmans Solicitors, wasn’t immediately returned. Krilov-Harrison settled at an early stage of the investigation and received a 20 percent reduction of the fine, the FSA said.
Pacific Continental
The FSA liquidated Pacific Continental last year for sharing details of its clients with people who conducted share- selling scams. The regulator fined and banned two executives at the London-based brokerage in January, and arrested one of its former directors Nov. 6 in connection with a boiler-room scam.
The regulator has been trying to stamp out market abuse and its criminal equivalent, insider trading, after criticism from lawmakers that it wasn’t doing enough to prevent it.
“This is the FSA just being pragmatic and getting some sort of enforcement outcome,” said Steven Francis, a former FSA enforcement official who is now a regulatory lawyer at Reynolds Porter Chamberlain. “The dealing was in March 2007, quite a long time ago, but the reality is that if this were a criminal case we’d only see this getting to trial in a couple of years.”
Provexis
Krilov-Harrison found out that Provexis, a U.K. maker of health-food additives, had started an agreement with Unilever Plc, according to the FSA. He called three clients from March 27, 2007, to encourage them to buy Provexis. Clients bought at least 10,000 pounds’ worth of shares after speaking to Krilov- Harrison, according to the FSA’s investigation report.
On March 30, 2007, Provexis announced that it had entered a “long-term collaboration” with Unilever. The share price increased by 19.81 percent to 3.75 pence per share from 3.13 pence the preceding day, according to the FSA.
The FSA earlier this month fined UBS AG 8 million pounds, its third-largest penalty ever, for failing to stop four employees in London from making unauthorized trades with customer money. The regulator said UBS’s bonus policies contributed to the violations by encouraging employees to take risks.
To contact the reporters on this story: Joseph Heaven in Zurich at jheaven1@bloomberg.netCaroline Binham in London at cbinham@bloomberg.net
Last Updated: November 17, 2009 11:01 EST |
