A Birmingham accountant has been fined £10,000 after "cheating for personal gain" in a share transaction.
Mr Arif Mohammed, a former PricewaterhouseCoopers audit manager, was found to have committed market abuse.
The fine has been imposed by the Financial Services Authority and follows a Financial Services and Markets Tribunal hearing into the affair.
It is the first time the market abuse provisions in the Financial Services and Markets Act 2000 have been the subject of a tribunal decision.
Mr Mohammed qualified in 1994 and the next year joined the then Coopers & Lybrand. He became a manager in 2000 and was working in the firm's audit practice, based in Birmingham, when the matter came to light.
Mr Mohammed bought shares in Delta, a London Stock Exchange listed electrical and engineering-services company, based on his knowledge that the company intended to sell its electrical division.
He became aware of what was confidential information because Delta's electrical division was an audit client of PwC and Mr Mohammed worked on the company's audit.
David Mayhew, 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."
The tribunal found that in July 2002, Mr Mohammed first became aware of the proposed sale of Delta's electrical division - a project codenamed Operation Shark.
He was told that this information was confidential and not to be discussed with company officials. Although Mr Mohammed began handing over the responsibility for elements of Delta's audit that September, he remained on the audit team assigned to Delta throughout the period leading up to the disposal announcement.
In particular, Mr Mohammed remained responsible for planning staff to work on Delta and had reason to know about the sale's progress because of its impact on resource planning. At the end of November, Mr Mohammed was aware that the sale process was ongoing, and was getting close to agreement.
Based on this information, he purchased 15,000 shares in Delta on November 29 at 80p each. Delta announced the disposal on December 9 and Mr Mohammed sold his shares the following day at 105p each, making a profit of £3,750.
The tribunal held that information that the sale process was ongoing was in itself sufficiently specific and precise, even without details of the proposed deal, to amount to relevant information for the purposes of the market-abuse provisions.
"Mr Mohammed knew what other market participants could only guess at, namely that Delta was, in fact, in the train of selling its electrical division, even if there was always the possibility that the sale might not go ahead, and uncertainty as to how, if it did, it would affect the share price," the tribunal stated.
