FSA Raps Financial Consultant for Short Selling Eicom Shares

Jack Humphrey, Regulatory journalist
February 07, 2011 /

The Financial Services Authority has ordered a financial consultant of digital broadcasting firm Eicom to cease from practicing his profession in the financial services industry in addition to the financial penalty imposed on him for short selling shares to unsuspecting investors.

The FSA’s order emanates from the directive issued by the Upper Tribunal (Tax and Chancery Chamber) ordering David Massey to pay £150,000.

According to FSA, the financial consultant allegedly short sold 2.5 million of Eicom shares on November 1, 2007 at 8 percent per share using the inside information of the digital broadcaster’s plan to sell them at 3.5 percent per share.

“Within a matter of minutes he accepted an offer to subscribe for 2.6 million newly issued Eicom shares at 3.5 percent and used the shares he obtained to close his short position, making a net profit of over £100,000,” the FSA said.

The financial consultant allegedly obtained the inside information when Eicom had talked with him regarding its need to fund its planned acquisition. The FSA claimed Massey was confident to short sell the shares knowing Eicom would “issue up to 3 million shares to him at a substantial discount.”

Massey was a Corporate Finance Executive at Zimmerman Adams International when the reverse trading took place, and at some other time served as financial consultant for public relations at Eicom for five years.

“Massey’s actions were unacceptable. He abused his position as an FSA approved person by acting in a personal capacity and failing to inform the buyer that they would be buying new shares issued at a significant discount to the market price, keeping all the profit for himself,” said Margaret Cole, managing director of the enforcement and financial crime at the FSA.

The FSA added that the financial consultant tried to deny he had connections with Eicom when he was being held under investigation by Zimmerman Adams International and its compliance advisors.

 

Share your opinion