FSA tribunal upholds fine on auditor

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The Independent Online

A former audit manager at PricewaterhouseCoopers (PwC) abused his position and cheated for personal gain after dealing in shares in a client company, the Financial Services Authority said yesterday.

A former audit manager at PricewaterhouseCoopers (PwC) abused his position and cheated for personal gain after dealing in shares in a client company, the Financial Services Authority said yesterday.

The City watchdog announced it was fining Arif Mohammed £10,000 for committing market abuse. Mr Mohammed had appealed against the FSA's original decision to fine him in April last year, but the Financial Services and Markets Tribunal upheld the FSA's decision and yesterday directed the regulator to proceed with Mr Mohammed's punishment.

The ex-audit manger bought shares in his client company, Delta, a quoted industrial group, on 29 November 2002. He purchased 15,000 shares at 80p each after learning that the company was to sell its electricals division. After the sale was announced on 9 December 2002, hesold the shares the next day at 105p each, making a profit of £3,750.

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

A statement from the tribunal said that acting on information that the sale was going ahead, even without knowing precise details of the proposed deal or how it might affect the share price, was sufficiently specific to amount to a breach of the market abuse provisions.

A spokesman for PwC said: "PricewaterhouseCoopers is extremely disappointed by the behaviour of Arif Mohammed. This was an isolated case, but by failing to comply with the firm's strict independence rules, [he] has let both himself and his colleagues down. [He] no longer works for PwC. The firm will not hesitate to act when it uncovers any act that is in breach of its rules or code of conduct."

The audit firm instigated disciplinary proceedings against Mr Mohammed after it learnt he had bought shares in Delta. However, Mr Mohammed resigned in February last year, leaving the company without serving his notice.

"PwC completed the proceedings in his absence and the disciplinary panel concluded that had Mr Mohammed not resigned in breach of his contract and remained in PwC's employment, he would have been summarily dismissed for gross misconduct," the company said.

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