The UK Financial Services Authority (FSA) announced on September 2 that it had fined Mark Lockwood, a former trading desk manager at a retail stockbroker, £20,000 (approx. $33,500) for failing to observe proper standards of market conduct. He failed to identify and report insider trading by clients in shares of Amerisur Resources plc, an oil and gas exploration company.
The transaction in question was a sale of shares on May 23, 2007, ahead of an announcement by the company of a placing of shares the next day. (Lockwood’s clients were fined a total of £19,050 (approx. $32,000) in December 2008 after a separate FSA enforcement action). The FSA concluded that Lockwood knew of the impending transaction and ignored clear warning signals from the clients as to the basis of the trade. Lockwood’s conduct resulted in the failure to prevent the trade and meant that his firm did not submit a Suspicious Transaction Report (STR) to the FSA. The trade came to the FSA’s attention only because of an STR submitted by another broker.
Margaret Cole, the FSA’s Director of Enforcement, said the fine emphasized the importance of the STR regime. The submission by broking firms of STRs is a key element in detecting market abuse. The failure to file an STR can mean that transactions based on inside information remain undetected and unpunished. Brokers and their employees should be in no doubt as to their responsibilities in this area, and the FSA will not hesitate to take action where they fail to meet them. See also the final paragraph of the previous item on Market Watch 33.