Last updated: February 16, 2010 1:18 pm

Genel Enerji head hit by £1m FSA fine

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Mehmet Sepil, chief executive of Genel Enerji, a Turkish exploration company, has paid the biggest fine handed out by the UK’s Financial Services Authority to an individual for market abuse.

Mr Sepil was fined £967,005 ($1.5m) for dealing in shares of UK-listed Heritage Oil, Genel’s partner in Iraqi Kurdistan’s Miran oilfield, on the basis of inside information, the UK market regulator said on Tuesday.

Two other Genel executives were also fined a total of nearly £200,000 for insider dealing.

The FSA wants to show it is clamping down on insider trading, after criticism of infrequent criminal convictions. Margaret Cole, director of enforcement at the FSA, said the penalties – which include profits of more than £300,000 made by the three – “send a clear message to companies and individuals wherever they are based”.

It began the investigation last August after Mr Sepil and his colleagues voluntarily contacted the regulator, which was then considering whether to approve a planned merger between Heritage and Genel.

A Genel board member said the lengthy investigation was one of the issues that caused the companies to call off the merger in November as neither could wait longer for regulatory approval. The inquiry also cast doubt on whether Mr Sepil could serve as chief executive of the new entity.

The FSA said the three Genel executives had discussed confidential results from Heritage’s tests at the Miran field at meetings in London on May 4.

The next day, they bought shares in Heritage, impressing on brokers the need for speed. “The faster the transaction the better,” the FSA quoted Mr Sepil as having said.

On May 6, Heritage announced the Miran test results, sending its shares up about 25 per cent. That day, the Genel executives sold the shares at a profit.

Mr Sepil said in a statement they were unaware of legal restrictions in dealing in the UK in those circumstances and had co-operated with the FSA throughout, offering to disgorge profits.

Simon Morris, of law firm CMS Cameron McKenna, said fines would have been a “significant multiple” of those imposed if the FSA had been pursuing “resistant rule-breakers”.

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