The Financial Services Authority (FSA) has today fined Jonathan Malins £25,000 for committing market abuse by misusing relevant information to buy shares in Cambrian Mining (Cambrian), an AIM company. Mr Malins, the finance director of Cambrian, bought 50,000 shares ahead of the announcement of a new share placing and 20,000 shares before the company's interim results in March 2005.
Hector Sants, FSA Managing Director for Wholesale Business, said:
"We expect those who occupy positions of responsibility and trust in publicly traded companies, such as the finance director, not to abuse this by seeking to take advantage of the sensitive information in their possession.
"In carrying out these transactions Mr Malins failed to observe his own company's rules on trading in the close period and did not behave to the standard expected of the finance director of an AIM company.
"The FSA will take appropriate action against those who, in abusing their privileged positions for personal gain, undermine the integrity of the UK's markets."
The FSA investigation found that Mr Malins, the only executive director of Cambrian based in the UK, had committed market abuse by buying shares in Cambrian during a close period based on his inside knowledge of the company's financial condition and business performance on 23 March 2005 and 31 March 2005.
Mr Malins chaired a meeting on the morning of 23 March 2005 to discuss a new share placing by the company - at a premium to the share price - following which he bought 50,000 shares in Cambrian. The order was filled in two tranches by 15.14pm with the announcement being made at 16.10pm. He did not seek permission to buy the shares, as is required during a close period, and knew that the placing had not been announced when he made his purchase. Mr Malins, who continues to hold the shares, would have made £6,000 had he sold his shares following the market's positive reaction to the announcement.
On 30 March Mr Malins chaired a board meeting to finalise the accounts and Interim Results, which showed an increase in profitability ahead of market expectations. He sought permission to buy 20,000 shares in Cambrian and was granted this on the basis that the purchase would take place following the announcement of the Interim Results. He bought the shares at 9.22am on 31 March 2005 before the Interim Results had been published. The shares, which he continues to hold, would have netted him a profit of £400 had he chosen to sell following the announcement.
Background
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The full text of the Final Notice, dated 20 December 2005, includes the background to the case, the relevant statutory provisions and the regulatory requirements contravened and the factors taken into account when setting the level of the fine.
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This case was settled under the FSA's Executive Settlement Scheme.
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Cambrian Mining was formed in 2002. It obtained a listing for its ordinary shares on AIM in 2003. Cambrian is a diversified mining company.
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Financial penalties are not treated as income by the FSA. They are applied for the benefit of authorised persons (or the issuers of securities admitted to the official list) as appropriate, and so given back to the industry in subsequent years.
- The 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 if committed before the implementation of the Market Abuse Directive in the UK on 1 July 2005, is defined as one of three types of behaviour:
- Misuse of information (previous cases include Peter Bracken, Robert Middlemiss, Michael Davies, Hutchings and Smith, David Isaacs and Arif Mohammed)
- Misleading statements and impressions (Shell and Bonnier and Indigo)
- Market distortion (EBG & Potts)
- 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; securing the appropriate degree of protection for consumers; and fighting financial crime.
- The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness
