Mehmet Sepil, Chief Executive Officer of Turkish oil exploration company Genel Enerji, has paid the biggest fine handed out by the UK's Financial Services Authority (FSA) to an individual for market abuse.
Genel has a 25% stake in the licence to explore the Miran oilfield in the Kurdistan Region of Iraq, with London-listed Heritage Oil owning 75%.
Mr. Sepil was fined £967,005 ($1.5m) for dealing in shares of Heritage Oil on the basis of inside information, the UK market regulator said yesterday.
Two other Genel executives – Chief Commercial Officer, Murat Ozgul, and Exploration Manager, Levent Akca – were also fined £105,240 and £94,062 respectively for insider dealing.
The amounts include repayment of profits of more than £300,000 made by the three.
The companies had been in merger negotiations, and because of their close relationship Genel had been kept informed on the progress of Heritage's testing in the Miran field – by 4th May 2009 the tests had been concluded and were successful, but the market had not yet been informed.
On 5th May, the three bought more than £1.5m worth of Heritage shares; the following morning, Heritage announced a discovery of between 2.3 to 4.2 billion barrels of oil. The shares jumped 25% within hours, at which point the men sold their holdings.
The incident came to light as part of the merger negotiations. When questioned about any transactions in Heritage shares, the men disclosed the deals. Shortly afterwards, they voluntarily reported the matter to the authorities.
The FSA found that they did not set out to commit market abuse, that they were not familiar with the legal requirements which prohibited them from dealing in Heritage shares, and that they had not received advice on these at the time.
As a result of their cooperation, the regulator did not bring criminal charges, and reduced the fines by 30%.
Margaret Cole, director of enforcement at the FSA, said: "The FSA expects those entrusted with inside information not to betray that trust. We will not tolerate the abuse of a privileged position to make a personal profit at the expense of other market participants and these penalties underline our commitment to combating this behaviour."