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The FCA has fined Russel Gerrity £309,843 for using inside information to net himself £128,765.
As a consultant, Mr Gerrity had access to information about whether oil and gas had been discovered during the drilling of wells. Between October 2018 and January 2022, he took advantage of this and used inside information to buy shares in Chariot Oil & Gas Limited and Eco (Atlantic) Oil and Gas Plc before announcements that increased their price.
On another occasion, he used inside information to avoid a loss. He sold shares that he already owned before an announcement that no oil or gas had been found, which then resulted in a price fall.
The FCA was initially notified of some of Mr Gerrity's trading through Suspicious Transaction and Order Reports (STORs) submitted by a firm, which the FCA says illustrates the vital role of industry in uncovering market abuse.
During its subsequent investigation, the FCA's systems detected further suspicious trades placed by Mr Gerrity, over multiple accounts with different brokers, while he was based outside the UK.
Mr Gerrity engaged in insider dealing in breach of Article 14(a) of the UK Market Abuse Regulations.
Mr Gerrity agreed to solve this matter and qualified for a 30% (stage 1) discount under the FCA's settlement procedures (albeit not applicable to the disgorgement element of the penalty). Were it not for this discount, the FCA would have imposed a financial penalty of £387,448.
Key takeaways
Taking assertive action on market abuse was one of the FCA's 13 enduring commitments in its last annual report, and the FCA seeks to achieve effective deterrence by making sure market abuse does not pay. However, this is another matter in which a significant period of time passed between the conclusion of the abusive trading and the imposition of the sanction - nearly four years. That said, the seriousness of the breach was assessed at level 4 (out of 5), which resulted in a profit multiplier of 3 being applied to calculate the non-disgorgement element of the financial penalty (pre-settlement discount).
The conduct was considered serious as not only did the individual gain a significant benefit from it, but he abused a position of trust to do so whilst being aware of the regulations on the use of inside information. Notwithstanding that the conduct (as distinct from the inside information on which it was based) did not have a significant impact on the price of the shares in question, the FCA considers this type of market abuse to be damaging to market confidence.
All people who may come into possession of inside information in relation to listed companies, whether they be employees or externally engaged consultants, need to make sure they familiarise themselves and comply with the company's code of conduct/share dealing code and requirements of the market abuse regime.
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