A stockbroker who missed “clear warning signals” and allowed a client to trade on inside information has been fined £20,000 by the Financial Services Authority (FSA) but allowed to continue working in the City.
Mark Lockwood, 29, who was a trading desk manager at Hoodless Brennan, the retail broker, at the time of the breach, failed to identify and report a suspicious trade, as required under FSA rules. Mr Lockwood, who is now responsible for compliance at his broking firm City Capital Markets, allowed a Hoodless Brennan client to sell shares in Amerisur, the AIM-listed oil and gas group, even though that client was privy to inside information.
The client, identified only as Y, told Mr Lockwood that he was “in a bit of a quandary” over the sale of 549,000 Amerisur shares. Instead of questioning him further, Mr Lockwood told the client it was best to say nothing and proceeded to execute the trade.
That was despite client Y explaining that he was in the same position regarding Amerisur shares as a friend of his, client X, also a customer of Mr Lockwood. X had telephoned Mr Lockwood earlier that day to tell him that he had received inside information on Amerisur’s plans to sell a large batch of shares. Recognising this as confidential information that prohibited client X from trading, Mr Lockwood reported the conversation to his supervisors.
Yet despite several “clear alerting factors” given by Y when he phoned Mr Lockwood later that day, the broker went ahead with the illegal trade.
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“The FSA considers that client Y provided you with sufficient information to enable you to understand that the proposed transaction was suspicious,” the regulator said in its report on Mr Lockwood.
Since he accepted that he was aware of the rules on suspicious transactions, his inaction was a “significant failure to observe proper standards”. But the FSA added that Mr Lockwood’s “abusive behaviour demonstrated acts of omission rather than behaviour calculated to be deliberate or reckless”.
The regulator said it was satisfied that he would not make the same mistake again and so his continued employment in financial services “does not present a risk to the consumer”.
Mr Lockwood, who is director, compliance officer and anti-money laundering officer at City Capital Markets, declined to comment.