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FSA Fines Brother Over Monterrico Insider Trading

January 14, 2009

The U.K. markets regulator fined a brother of a man it had already penalized in November over using insider information to buy shares. It’s the first time the agency has fined someone outside Britain for market abuse.

The Financial Services Authority said today that it fined Erik Boyen, a Belgian dentist described as an “experienced amateur investor,” 176,254 pounds ($256,000) for trading shares in Monterrico Metals Plc using insider information. The London- based regulator fined Boyen’s brother, Filip, together with the company’s former chairman and ex-U.K. ambassador to Peru, Richard Ralph, over the improper trades.

The fine comes as the FSA has been given new powers from the U.K. government that will enable the regulator to offer immunity from prosecution if people with material information about crimes like insider trading come forward and cooperate. The regulator will be able to use so-called immunity notices starting in early 2010.

“This shows the extra-territorial nature of the FSA’s market-abuse rules,” said Chris Brennan, a former FSA lawyer and now a regulatory specialist at London-based Barlow Lyde & Gilbert LLP. “It doesn’t matter where in the world you are.”

The regulator has come under fire from lawmakers for not doing enough to eliminate illegal insider trading, which according to FSA data increased during the mergers and acquisitions boom. Last week, the FSA filed its fourth criminal prosecution of insider trading in 12 months, charging a 44-year- old man with insider trading and money-laundering.

Boyen declined to comment when reached at his dental office in Genk, Belgium.

‘Unfair Advantage’

The overall penalty represents the proceeds of Boyen’s insider trading, at 127,254 pounds, plus a fine of 49,000 pounds, the FSA said. Boyen, 55, settled his case with the regulator and qualified for a 30 percent discount on the penalty portion of the fine, according to the FSA. His fine is higher than both his brother’s and Ralph’s, who received penalties of 81,982 pounds and 117,691 pounds, respectively.

Boyen’s lawyer, Elizabeth Robertson at London-based Addleshaw Goddard, wasn’t immediately available to comment.

No one was available to comment after office hours at Monterrico’s head office in Hong Kong. The company, whose operations are in Peru, is listed on London’s Alternative Investment Market.

“Erik Boyen used inside information to gain an unfair advantage over other market participants in order to make a substantial profit,” said Margaret Cole, the FSA’s director of enforcement, today in a statement. The regulator has now closed its case probing insider trading of Monterrico shares, the statement said.

‘Credible Deterrence’

Cole said in a separate statement that the FSA’s new immunity powers will “further strengthen our ability to achieve credible deterrence.”

The FSA said that Ralph asked Filip Boyen to buy 30,000 pounds of Monterrico shares on his behalf in January 2007. The company was at the time in takeover talks with Xiamen Zijin Tongguan Investment Development Co., a Chinese group that included the nation’s biggest copper smelter.

Board members are restricted from buying stock in their company when it’s in merger talks. Filip then asked his brother to buy shares. Erik’s purchases made Monterrico’s share price rise, and his broker asked him if he had a “crush” on the company, according to the FSA’s report.

Suspicious Trades

According to FSA data, suspicious trades occurred before 29 percent of U.K. public company takeovers in 2007 and 2006, up from 24 in 2005. The FSA had filed no criminal prosecutions of insider trading before January 2008. Coincidentally, one of its few criminal cases also involves a dentist and his son.

Ralph retired from the diplomatic service earlier in 2006 after postings in Romania, Latvia, the Falkland Islands, and his stint as ambassador to Peru from 2003 to 2006, according to a company statement.

During his tenure in Romania, Ralph was one of the diplomats involved in a 2002 row about former Prime Minister Tony Blair’s lobbying of the Romanian government for LNM Group, a steelmaker whose owner gave to Blair’s Labour Party.

Blair sent a letter to the Romanian prime minister in 2001 endorsing the sale of Sidex SA, Romania’s national steelworks, to LNM, whose owner, Lakshmi Mittal, gave 125,000 pounds to Labour. Blair said he didn’t know about the donation at the time and that the letter was sent on the advice of British diplomats in Romania.

To contact the reporters on this story: Caroline Binham in London at

To contact the editor responsible for this story: Anthony Aarons at

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