On 16 February 2010 the Financial Services Authority (FSA) published Final Notices relating to the following three executives of Genel Enerji A.S. (Genel), a Turkish registered company with oil operations in the Kurdistan region of Northern Iraq, for engaging in market abuse in contravention of sections 123(1) and 118(2) Financial Services and Markets Act 2000 (FSMA):
- Mehmet Sepil, Genel’s chief executive officer, who was fined £967,005. This is the largest fine imposed by the FSA on an individual for market abuse to date.
- Murat Ozgul, Genel’s chief commercial officer, who was fined £105,240.
- Levent Akca, Genel’s exploration manager, who was fined £94,062.
On 31 March 2009 Genel entered into a joint venture with Heritage Oil plc (Heritage), a public company listed on the London Stock Exchange, under which it acquired a 25 per cent interest in Heritage’s oil exploration at the Miran field in Kurdistan. In consequence of this joint venture, Heritage supplied Genel with confidential information in the form of detailed reports on the progress of the drilling tests conducted at Miran. Following the conclusion of the tests on 3 May 2009, Genel was informed that they had been positive. On the basis of this confidential information, each of the executives purchased shares in Heritage between 4 and 5 May 2009. Heritage announced the results of the tests at Miran on 6 May 2009 and the price of Heritage’s shares rose by approximately 25 per cent immediately after the announcement was made. Each of the executives subsequently sold their shares during that day.
Each of the executives was found to be an insider for the purposes of section 118B(c) FSMA and had engaged in market abuse contrary to sections 123(1) and 118(2) FSMA. However, in determining the financial penalty, the FSA took account of the fact that the executives had assisted with the FSA’s enquiries and had approached the FSA once they had taken advice about the share dealings. The FSA also recognised that the executives did not intend to commit market abuse and that they were unfamiliar with the legal requirements prohibiting them from dealing in Heritage shares.
Each financial penalty imposed included a disgorgement of the profits that the executives had made and an additional penalty element. However, each penalty imposed was reduced by 30 per cent to take account of the executives settling at an early stage of the FSA investigation.