What happens when an analyst tries to give clients the impression he's disclosing valuable inside information, when it's really not and the analyst may have fudged some of the details, which in hindsight proves to be substantially accurate? 

The U.K.'s FSA, its securities watchdog, fined the former senior research analyst with MF Global Securities, for “making misleading and inaccurate disclosures to the market about Enterprise Inns,” a chain of nearly 7,000 pubs. 

    “*** HOT OFF PRESS***   During the course of an evening group meeting with the CEO of Punch Taverns, attended by MF Global Securities analyst Christopher Gower, there was a discussion about an application by Enterprise Inns to convert to a REIT for tax advantages - same as what other pubs were doing.  After the meeting, Mr. Gower allegedly sent the following IM to 14 clients of his firm:

“*** HOT OFF PRESS*** Just had meeting with C.E.O. of PUNCH TAVERNS. They have heard from HM Revenue & Customs that it is highly likely Enterprise Inns has been granted REIT status and ETI are due to announce this on 13th May at interims. Expect ETI to bounce (was up 10% on previous HMRC news) BUT then fall back as mkt realises it will take time to implement…. MORE on my meeting to follow…. Chris”  

[Editor's Note:  C-I introduced color for emphasis.]

Shares of Enterprise Inns shot up on heavy volume.  While the IM gave the impression that he had inside information, the FSA said, “in fact, Gower had no such information.  The message was misleading and inaccurate.”  A half-hour after Mr. Gower’s message, Enterprise Inns publicly confirmed that it had received confirmation that it was eligible to convert to a REIT subject to certain conditions.  Shares closed up nearly 30% that day.

    Gower's Defense.   Mr. Gower challenged the FSA's position, saying his message was a substantially accurate summary of the conversation.  The regulator's responded, noting that its decision: 

“does not allege that any inside information was in fact imparted or that Mr Gower intended to give the impression that inside information had been imparted.  However, by stating that Punch Taverns ‘have heard from HM Revenue & Customs’ information concerning ETI’s REIT application, Mr. Gower gave the impression that inside information had been disclosed.”   [NYT Dealbook, 1/13]