The Financial Conduct Authority has fined a Jersey company director for engaging in insider dealing and has also publicly censured him for improper disclosure.
The UK financial services regulator said in a statement today that it has fined Jersey businessman Gavin Breeze £59,557. Breeze, who holds several directorships of private companies and is also a non-executive director of one AIM listed business, attempted to sell his entire 8% shareholding in MoPowered plc while in possession of inside information.
The FCA said that if Breeze been successful, he could have avoided a loss of up to £242,000. He also passed the inside information onto another shareholder. In addition to the fine and censure, the FCA has ordered Breeze to pay restitution amounting to £1,850 plus interest of £259 to the individuals who suffered financial losses as a result of his actions.
The individuals who bought Breeze’s shares did so at a higher price than they would have done had the information known to Breeze been public.
Insider trading ‘not well understood’: FCA
Director of enforcement and market Oversight at the FCA, Mark Steward, said that this misconduct demonstrates the abuse of insider trading is still not well understood or appreciated, even by experienced industry professionals.
“Prohibited insiders, especially market professionals, will be caught and be made to account to those they have misled. While the amounts are small, the principle here is an important one and our message to market professionals in particular cannot be any clearer.”
The FCA said that in September 2014, the chief executive of MoPowered telephoned Gavin Breeze and told him the company was intending to raise new capital via a share placement, subsequently emailed Breeze asking whether he would be interested in subscribing for shares at what he was told would likely be a substantial discount to the company’s current share price.
Attached to the email was a presentation setting out the company’s plans for the funds raised through the placing which included a clear statement that the information it contained was likely to be considered inside information.
The FCA said that it considers it was clear the discounted placement, once announced, was going to have a substantial impact on the company’s share price. As it turned out, when the placement was disclosed, the share price of MoPowered fell from 20.25p to 8p in the first hour of post-announcement trading.
Breeze forwarded the email and attached presentation to another shareholder who was not an insider thereby disclosing inside information. Fortunately the other shareholder did not act on the information.
Prior to the placing, the chief executive emailed Breeze a second time, asking if he would provide a significant level of funding in order to prevent the share placing proceeding at a considerable discount to the share price at the time. Very shortly after receiving this email, Breeze instructed his broker to sell his entire shareholding in MoPowered ‘at any price’.
The broker was able to sell 10,000 of Breeze’s 1,273,500 shares before MoPowered announced the discounted share placing at 5p on 22 September 2014. As mentioned, MoPowered’s share price fell from 20.25p to 8p in the first hour of trading.
In selling the 10,000 shares prior to the announcement Mr Breeze avoided a loss of £1,900 and while the FCA recognises that it is unlikely Mr Breeze would have been able to dispose of his entire shareholding at the prevailing price pre-announcement, had he been able to, he could have avoided a loss of up to £242,000.
Breeze made admissions in interview and proactively cooperated with the FCA’s investigation, for which he received a discount of 15%. In agreeing to settle at the earliest opportunity, Mr Breeze received a further discount of 30%; but for this, the FCA would have imposed a penalty of £85,057.