UK Financial Services Authority Fines Individual £15 000 For Market Abuse

The FSA has today fined Robert Middlemiss £15,000 for market abuse. In April 2002, Mr Middlemiss, the Company Secretary at Profile Media Group (PMG), became aware that PMG's revenues were likely to be significantly below expectations. Before this news was released to the market, he sold some of his own shareholding in PMG to avoid making a loss. In doing so he breached PMG's own rules requiring senior employess to seek prior approval when dealing the company's shares. Following the announcement, the share price dropped from 14.5p to 4.75p. By selling 70 000 PMG shares when he did, he avoided a loss of £6, 825.

Andrew Procter, Director of Enforcement at the FSA said "We will not tolerate individuals using a position of trust for their own personal financial gain. We have taken action in this case because of the seriousness with which we view such abuses of position."

"The Market Abuse Code applies to everyone. There should be no doubt that we will pursue those who, on the basis of unpublished information, deal ahead of announcements."

The US arm of PMG, Profile Pursuit Inc (PPI), had told PMG head office that it was going to experience a significant fall in revenues. Having established that this shortfall would mean that PMG's results would be materially below market expectations, PMG issued their announcement on May 2nd 2002.

Background

1. Profile Media Group is listed on the AIM market. It obtained its listing in 1996. Since 1998, PMG has acquired a number of other companies. PPI was the most significant subsidiary however, and was based in the USA.
2. Mr Middlemiss was the Company Secretary, and joined the company in 1997. He owned 291,800 shares. He was involved in assessing the impact of the PPI trading figures on the rest of the group, including undertaking a re-forecast for other group subsidiaries. It is this work that had given him access to the relevant information.
3. The new market abuse regime was first introduced by the Financial Services and Markets Act and applies to conduct on or after 1 December 2001. Under the Act the FSA has power to impose financial penalties for market abuse, which is defined as one of three types of behaviour:
   • Misuse of information
   • Misleading statements and impressions and
   • Market distortion
   The proceedings in this case relate to the first category of behaviour - misuse of information - which involves making improper use of information that other investors would regard as significant in advance of that information being announced to the market as a whole. The provision protects investment markets, such as the equity markets, that rely on the timely provision of information to all market participants on an equal basis. This is the first case to be completed under the new market abuse regime
4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the appropriate degree of protection for consumers; and fighting financial crime.
5. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.