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FSA fines former PwC audit manager £10,000
04-10-2005, 10:02 PM,
#1
FSA fines former PwC audit manager £10,000
http//www.financeandtaxtribunals.gov.uk/decisions/seldecisions/financialservices.htm

Former PricewaterhouseCoopers auditor was fined £10,000 by the Financial Services Authority.

The Financial Services and Markets Tribunal ordered the penalty against Arif Mohammed, a former PwC audit manager, after finding that he had bought shares in Delta plc when he knew the company was planning to sell its electrical division in an operation codenamed "Project Spark".

Mohammed became aware of this confidential information because Delta's electrical division was an audit client of PwC and Mohammed worked on the company's audit, the tribunal concluded.

Although Mohammed handed over the responsibility for elements of Delta's audit in September 2002, he retained a watching brief on the audit team throughout the period leading up to the disposal.

The Delta engagement partner at PwC, David Watson, told Mohammed about the proposed sale in July 2002, explaining what work Delta wanted done because of Mohammed's role in planning staff assignments on the engagement.

Based on his knowledge that the sale was nearing fruition, Mohammed purchased 15,000 shares in Delta on 29 November 2002 at 80p each. Delta announced the disposal on 9 December 2002 and Mohammed sold his shares the following day at 105p to make a profit of £3,750.

"Mr Mohammed, as an auditor, knew he should not be dealing in Delta shares," said FSA acting director of enforcement David Mayhew.

"Similarly, the market would expect an auditor not to deal in shares of an audit client. To abuse his position by essentially cheating for personal gain, is a breach of trust and undermines the integrity of the market."

In his defence, Mohammed told the tribunal that while he was aware of a possible sale, he had none of the details that would have affected the share price. His purchase of the shares was not in any way influenced by the information which he had, and though the purchase breached audit independence rules, his action was not unlawful, and he has not committed an act of market abuse.

Mohammed's case was the first time the market abuse provisions in the Financial Services and Markets Act 2000 (FSMA) have been the subject of a Tribunal decision. Mohammed argued that a market abuse case was akin to a criminal offence, and that the FSA should have to prove its case beyond reasonable doubt. The tribunal however, agreed with the FSA that this was a “balance of probabilities” case, subject to evidential “sliding scale” - the more serious the allegation, the more cogent the evidence needs to be to prove it.


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If I could... Then I would... Turn back time!!
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04-11-2005, 09:08 AM,
#2
 
I guess Mr. Muhammad did break rules, those of the FSA and of his previous employer. Working for a Big 4 myself, each employee is trained to understand independence rules including those of owning shares in companies that are the firms clients.

Even back in a Big 4 in Dubai we were asked to sign independence forms acknowledging the fact that one did not have any interests in a list of the firm's world wide clients !
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04-11-2005, 09:21 AM,
#3
 
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Pracs</i>
<br /> Working for a Big 4 myself, each employee is trained to understand independence rules including those of owning shares in companies that are the firms clients.

<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

It's just not at Big 4, last summer when I was doing internship in non-accounting department of Grant Thornton even there we were not allowed to have shares or other financial interest in any of the firm clients. I had to close my positions even though my contract was just for 4 months!!

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