Legal Updates

Commercial Law – FSA Fine – Market Abuse – Inside Information – The Body Shop

The Financial Services Authority (“FSA”) has announced that it has fined John Shevlin £85,000 for market abuse. Mr Shevlin was employed as an IT technician by the Body Shop International plc ("The Body Shop").

On the 10 January 2006, he established, through a Contract for Difference ("CFD"), a short position equivalent to 80,000 Body Shop shares, effectively betting that the share price would fall. It was discovered that this trade was based on inside information. Mr Shevlin subsequently closed out his CFD position on the 11 January 2006. It should be noted that this was after the Body Shop announced its Christmas trading results, which meant that Mr Shevlin made a profit of £38,472.

£29,000 was borrowed by Mr Shevlin, which was actually more than his annual salary, to carry out the trade. He managed to obtain the inside information by accessing a number of confidential e-mails containing The Body Shop's Christmas trading results sent and received by certain senior executives. The confidential e-mails also contained a draft announcement stating that The Body Shop had underperformed expectations.

Margaret Cole, FSA's Director of Enforcement, said:

"Mr Shevlin deliberately set out to obtain highly sensitive and valuable information to which he was not entitled. He abused the trust placed in him by his employers and misused his technical skills to gain a financial advantage over other market users. Firms must take steps to protect market sensitive information. Where individuals circumvent these protections they should expect to face significant financial or other sanctions, whether or not they are approved by the FSA. "In reaching its decision, the FSA has taken into account that there have been no previous findings of market misconduct against Mr Shevlin. No fault has been attributed to The Body Shop and Mr Shevlin has ceased to be in their employ".

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© RT COOPERS, 2008. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.

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