FCA fines third party consultant operating in Oil Exploration & Production for trading on material non-public information

Theme 1: The Definition of Inside Information in Oil and Gas Exploration

The FCA's Final Notice provides a textbook application of Article 7 of UKMAR to oil and gas exploration data. It established that drilling results from the Prospect S well (Chariot), Jethro-1 well (Eco), Joe-1 well (Eco), and Anchois-2 well (Chariot) constituted inside information at the time Mr. Gerrity traded.

The Article 7 requirements are summarised in the Notice as a four-part test on page 29, paragraph 5.9 as follows:

(1) The information has not been made public;

(2) The information relates to one or more issuers or financial instruments;

(3) The information was of a precise nature; and

(4) If made public, the information would have been likely to have a significant effect on the price of those financial instruments

For Occasion 1, the inside information was that "the data produced during the drilling of the primary S94 reservoir indicated that the well had failed to find oil in the primary target" (page 30, para 5.12). The FCA found this information was "of a precise nature because it indicated... a set of circumstances which existed" and "an event which may reasonably be expected to occur (namely that Chariot would make an announcement to the market, in the near future, that the Prospect S well had not encountered a hydrocarbon accumulation)" (page 31, para 5.14).

For the success cases (Occasions 2-4), the precision requirement was similarly satisfied. Regarding Jethro-1, the inside information was that"the drilling data from the Jethro-1 well indicated the presence of a significant oil discovery" (page 32, para 5.17). The email evidence was explicit: "We have just encountered at least 57m of pay in Jethro-1 main lobe" (page 16, para 4.71).

The price sensitivity analysis demonstrated dramatic share price movements following each RNS announcement: Chariot fell 61.39% after the Prospect S dry hole announcement (page 13, para 4.52), Eco rose 67.65% after Jethro-1 (page18, para 4.86), and Chariot rose 44.01% after Anchois-2 (page 25, para 4.149).

The FCA's analysis confirms that exploration drilling data meets the inside information threshold at the point when ‘Logging While Drilling’ (LWD) results or wireline logs indicate hydrocarbon presence or absence and well before formal RNS announcements.

Practitioner inference: This means the"information window" opens substantially earlier than many firms may assume. The moment technical personnel can interpret whether a target zone is oil-bearing or water-bearing, inside information exists.

Recitals 14–15 of UK MAR (see page 48–49 of the Final Notice) make it clear that inside information must be assessed ex ante e.g. you are judged based on what a reasonable person would have understood at the time, not with hindsight. In the Final Notice, the FCA’s view is that Mr Gerrity’s knowledge when he traded was already sufficiently precise and price-sensitive that, if it had been made public, it would likely have affected the pricing of the relevant financial instruments. “Ex ante” therefore meant looking at the window from when Mr Gerrity first received the inside information through to the moment he placed his orders in the relevant shares.

Compliance Considerations

Energy and commodity firms operating in E&P activities should consider implementing controls that recognise drilling data as presumptively inside information from the point of meaningful interpretation. It requires:

• Clear information barrier protocols for personnel receiving real-time LWD data;
• Immediate insider list creation when target zones are penetrated;
• Pre-defined criteria for when drilling results constitute "precise" information e.g. any indication of hydrocarbon shows or water-bearing formations; and
• Training on the difference between "preliminary" data and "precise" information under UK MAR.

Theme 2: Consultant and Contractor Insider Status Under UK MAR

The Gerrity case highlights that Article 8(4)(c) UK MAR which extends insider dealing prohibitions to persons "having access to the information through the exercise of an employment, profession or duties" applies with full force to external consultants, contractors, and service providers.

Mr. Gerrity was not an employee of Chariot, Eco, or Tullow. He provided services through Gaia Earth Sciences Limited (Gaia), a private consulting firm, via his own company Dataqual Limited (page 5, paras 4.2-4.3). The contractual chain was: Chariot/Tullow → Gaia → Dataqual → Mr. Gerrity. Despite this arms-length structure, the FCA found he was subject to UK MAR by virtue of his operational role.

The Notice establishes that Gaia's Code of Conduct expressly addressed this in that it applied to all "directors, consultants, officers, employees and sub-contractors" and noted that Gaia consultants "are often client representatives on location, either at the well site or in the client office" (page 5, para 4.7). The Code's insider trading section warned thatit was "unlawful to engage in transactions in the publicly traded shares or securities of any company when Personnel are in possession of material, non-public information (also known as 'inside information') regarding that company"(page 6, para 4.8).

The FCA specifically relied on Mr. Gerrity's awareness of these policies as noted in paragraph 4.9 at page 6:

Mr Gerrity would have been particularly familiar with the Code, due to his role as Operations Manager of Gaia, whereby he was responsible for training new consultants and ensuring that they understood its policies

On the scope of UK MAR Article 8(4)(c) the FCA noted that "This Article applies to any person who possesses inside information as a result of... (c)having access to the information through the exercise of an employment, profession or duties" (page 38, para 5.32).

It further noted the application of Article 8 to Mr. Gerrity, noting "The [FCA] is satisfied that Mr Gerrity was in possession of, and used, the inside information... thereby satisfying Article 8(4)(c) of UK MAR" (page 39, para 5.33).

This case should prompt immediate review of how energy and commodity firms manage MNPI access for their extended workforce. The consultant/contractor role is not excluded from exposure to MNPI. Any individual with operational access to drilling data whether employed directly, contracted through a service company, or engaged as an independent consultant falls within UK MAR's scope.

The FCA's reliance on corporate codes of conduct suggests these documents serve a dual purpose:

• Establishing individual awareness of obligations; and
• Providing evidence of deliberate breach where individuals trade despite policy prohibitions.

Firms should treat policy acknowledgements as potential enforcement evidence.

Key Takeaways

• Article 8(4)(c) UK MAR applies to consultants, contractors, and service providers and not just employees;
• Corporate codes of conduct are used by the FCA as evidence of awareness and deliberate breach;
• The contractual chain (operator → service company → individual) does not insulate individuals from liability;
• Responsibility for policy training creates heightened accountability when the trainer trades; and
• Joint venture partners (like Tullow) may consider extending dealing codes to cover partner company securities (Eco).

Theme 3: Patterns of Abusive Dealing and the FCA’s Evidential Standards

The FCA's evidentiary approach in the Gerrity case provides guidance for how regulators reconstruct insider dealing from circumstantial evidence. The FCA relied on five categories of evidence:

• Role-based access to information;
• Contemporaneous communications;
• Trading timing relative to information receipt;
• Trading direction aligned with information content; and
• Absence of alternative explanations.

For Occasion 1, the evidence chain is particularly detailed. Mr. Gerrity sent a WhatsApp message on 9 October 2018 stating: "Should be finished drilling tonight. Probably 2 runs wireline. Unless they hit lucky in next 3 orr [4] hours. Maybe off on Friday" (page 12, para 4.45). The FCA noted that"the drilling programme had stated that one or two wireline runs would be completed in the event of a 'dry hole' scenario, whilst five wireline runs would be completed in a 'success case' scenario" (page 12, para 4.46). This operational indicator demonstrated possession of inside information.

Further evidence came from communications about demobilising oil testing equipment: Mr. Gerrity "discussed the demobilisation of the equipment and personnel required to test oil samples" between 07:12 and 08:32 UTC on 10 October 2018, which "evidences that at this time Mr Gerrity was aware no oil had been discovered" (page 12, para 4.48). He sold his entire Chariotholding approximately 90 minutes later.

The FCA also applied the presumption in Recital 24 of UK MAR, which supports finding "use" where an individual trades after possessing inside information, absent alternative explanation.

The Gerrity case provides a detailed blueprint for how the FCA constructs insider dealing cases from circumstantial evidence.Compliance teams and individuals with access to commercially sensitive information should understand the following evidential patterns that regulators rely upon to establish possession and use of inside information.

1. Contemporaneous communications are the primary evidence of information possession

The FCA built its case largely through email chains and WhatsApp messages that Mr. Gerrity sent or received during drilling operations. For compliance teams, this means that any written communication, formal or informal, can become central evidence in an enforcement action. In Occasion 1, Mr. Gerrity's WhatsApp message stating "Probably 2 runs wireline" (page 12, para4. 45) was directly cited as evidence that he knew the well had failed. In Occasion 2, an email stating "We have just encountered at least 57m of pay" established the precise moment he possessed inside information. Firms should assume that all project communications will be reviewed by regulators in any subsequent investigation.

2. Operational indicators reveal inside information even without explicit statements

The FCA demonstrated that regulators will decode technical and operational shorthand to establish knowledge. The reference to "2 runs wireline" was not a casual comment - the FCA cross-referenced this against the drilling programme which specified that one or two wireline runs indicated a dry hole scenario, while five runs indicated success (page 12, para 4.46). Similarly, discussions about demobilising "Oil phase kit" (oil sampling equipment) were interpreted as evidence that Mr. Gerrity knew no oil had been discovered (page 12, para 4.48). Compliance teams should identify project-specific operational indicators that could reveal drilling outcomes and ensure personnel understand that such references carry regulatory significance.

3. Trading timing relative to information receipt creates a strong inference of "use"

The FCA placed significant weight on the temporal relationship between information receipt and trading activity. For Occasion 1, Mr. Gerrity sold his shares approximately 90 minutes after discussing equipment demobilisation. For Occasion 2, he purchased shares approximately 32 hours after receiving the discovery email. For Occasion 3, he began purchasing shares within days of being added to the confidential list. This pattern of information receipt followed by proximate trading creates a compelling inference that the information was "used" within the meaning of Article 8 UK MAR. Individuals who trade shortly after receiving material information will face significant difficulty rebutting this inference.

4. Long trading dormancy followed by sudden activity is analytically significant

The FCA specifically noted that Mr. Gerrity "had not traded in Chariot shares for a period of over seven months" before Occasion 1 (page 31, para5.13(e)), and "had not traded in Eco shares for over four months" before Occasion 2 (page 33, para 5.18(f)). Dormancy analysis is a standard tool in market abuse surveillance e.g. sudden trading activity in a previously dormant position, coinciding with access to material information, is a red flag that compliance teams and regulators routinely monitor. Personnel with access to MNPI should be aware that their historical trading patterns will be examinedif they trade during sensitive periods. For energy and commodity trading firms, this type of surveillance is performed by the counterparties whom the third-party trades with e.g. brokers, exchanges, etc and thus would not fall within their trade surveillance perimeter.

5. UK MAR Recital 24's "use" presumption shifts the burden to the individual

UK MAR Recital 24 states that where an individual possesses inside information and then deals, they are presumed to have "used" that information unless they can provide an alternative explanation. The FCA explicitly relied on this presumption: "The FCA relies on the presumption contained in Recital 24 of UK MAR" (page 39, para 5.34). This is a critical point for energy sector personnel as once possession is established, the individual bears the practical burden of explaining why their trading was not influenced by the inside information. Pre-existing trading plans, portfolio rebalancing, or other documented rationales become essential defences, but must be established before the trading occurs.

6. WhatsApp, personal devices, and informal messaging are fully within regulatory scope

The Gerrity case confirms that informal messaging platforms are subject to the same regulatory scrutiny as corporate email. Mr. Gerrity's WhatsApp messages were central to the FCA's evidence. Energy firms should ensure that their communications policies and monitoring capabilities extend to modern messaging platforms used by operational personnel, including those on personal devices. The expectation that "informal" communications are private or beyond regulatory reach is not acceptable. Firms should train personnel that any message discussing project status, drilling results, or operational decisions may be reviewed by regulators.

Theme 4: Corporate Policies and Their Enforcement Significance

The Gerrity Final Notice illustrates how corporate compliance policies serve as critical evidence in the FCA’s enforcement proceedings. Gaia's Code ofConduct and Tullow's All Employee Share Dealing Code were central to the FCA's case.

Tullow's Code extended to partner company securities. The code"addressed trading in partner companies" and stated: "From time to time, as a part of your employment or duties, you may come across information which is not inside information in relation to Tullow but which is inside information in relation to a different company (for example, a company that is a partner of or supplier to Tullow or its subsidiaries)" (page 14, para 4.61).

The practical application was demonstrated by specific warnings before theGuyana drilling campaign. On 5 April 2019, a follow-up email stated explicitly: "trading in Eco Atlantic (our partner in Guyana) as well as Tullow or evenTotal shares during the period of time that commercially sensitive geological information is available to you as a team member (discovery of oil or not in Guyana), is prohibited and could lead to criminal charges" (pages 14-15, para 4.64).

The Gerrity case demonstrates that corporate compliance policies serve a dual function in that they protect firms by establishing expected standards of conduct, but they also create an evidential record that regulators will use against individuals who breach those standards. Energy and commodity firms should consider the following when designing, implementing, or updating theirMNPI policies:

1. Corporate policies are used by the FCA as direct evidence of individual awareness

The FCA explicitly relied on Gaia's Code of Conduct to establish that Mr. Gerrity knew insider dealing was prohibited. The Authority cited DEPP6.5C.2G(13)(c) which considers whether "the individual knew that his actions were not in accordance with exchange rules, share dealing rules and/or the firm's internal procedures" and concluded that "Mr Gerrity knew that his actions contravened Gaia's Code of Conduct" (page 43, para 6.18). This finding contributed to the Level 4 seriousness assessment and the characterisation of his conduct as "deliberate." Firms should understand that clear, well-communicated policies eliminate the defence of ignorance and make enforcement easier, not harder.

2. Dealing codes should expressly address JV partner, contractor, and supplier securities

Tullow's Share Dealing Code specifically addressed trading in partner company securities: "From time to time, as a part of your employment or duties, you may come across information which is not inside information in relation to Tullow but which is inside information in relation to a different company (for example, a company that is a partner of or supplier to Tullow or its subsidiaries)" (page 14, para 4.61). This extension is critical for energy and commodity trading firms where exploration joint ventures are common. Information about drilling results may be inside information for multiple listed entities including the operator, non-operating partners, and potentially service companies. Dealing codes that only prohibit trading in "Company securities" are insufficient and leave gaps that create regulatory risk.

3. Pre-project cascade communications about insider dealing obligations are best practice

Before the Guyana drilling campaign, Tullow issued explicit warnings to project personnel. On 4 April 2019, an email "requested the recipients to cascade that the laws on insider dealing applied to trading in Eco shares in the same way they applied to Tullow" (page 14, para 4.63). The following day, a more detailed email stated: "trading in Eco Atlantic (our partner in Guyana) as well as Tullow or even Total shares during the period of time that commercially sensitive geological information is available to you as a team member (discovery of oil or not in Guyana), is prohibited and could lead to criminal charges" (pages 14-15, para 4.64). These cascade communications serve multiple purposes:

• They remind personnel of their obligations at the moment those obligations become most relevant;
• They extend awareness to contractors and consultants who may not have received initial onboarding training; and
• They create a documentary record that can be used in subsequent enforcement proceedings.

4. Policy acknowledgement creates accountability that regulators will rely upon

Where individuals have signed policy acknowledgements or completed training, regulators will treat this as evidence that the individual understood their obligations. The FCA noted that Gaia's Code applied to "directors, consultants, officers, employees and sub-contractors" (page 5, para 4.7)and that the Code's insider trading provisions were clear and unambiguous.  Firms should maintain records of policy acknowledgements with date stamps, training completion certificates, and any subsequent policy updates that were communicated. These records become essential evidence in demonstrating that individuals were aware of the rules they subsequently breached.

5. The role of "training others" heightens individual responsibility

The FCA specifically noted that "Mr Gerrity would have been particularly familiar with the Code, due to his role as Operations Manager ofGaia, whereby he was responsible for training new consultants and ensuring that they understood its policies" (page 6, para 4.9). This finding is significant as individuals who have responsibility for training others on compliance policies face heightened accountability when they themselves breach those policies. The FCA’s reasoning is that such individuals cannot credibly claim ignorance or misunderstanding, as their training role demonstrates deep familiarity with the rules. Compliance officers and senior personnel who deliver MNPI training should be aware that their role creates an elevated standard of expected conduct.

6. Explicit warnings about criminal liability reinforce the seriousness of obligations

Tullow's cascade email reminded personnel of both civil regulatory requirements and explicitly warned that trading "could lead to criminal charges, due to the 'insider trading laws'" (pages 14-15, para 4.64). This reference to criminal liability serves an important function as it signals to personnel that insider dealing is not merely a compliance breach or employment matter, but a serious offence with potentially life-altering consequences. Firms should consider whether their own communications adequately convey the gravity of insider dealing prohibitions, including the possibility of criminal prosecution under the Criminal Justice Act 1993 in addition to civil penalties under the Financial Services and Markets Act (FSMA).

Theme 5: Operational Indicators of Inside Information in Oil Drilling Contexts

The Gerrity Final Notice contains detailed technical analysis of how operational decisions signal inside information possession. These"indicators" provide a roadmap for surveillance and for understanding how regulators interpret offshore communications. Examples include:

• Wireline Run Counts. The drilling programme for Prospect S specified that "one or two wireline runs" would occur in a dry hole scenario, while "five wireline runs" were planned for a success case (page 10, para 4.34).
• Equipment Demobilisation. The FCA cited discussions about "demobilisation of the equipment and personnel required to test oil samples" as evidence that Mr. Gerrity knew no oil had been discovered (page 12, para 4.48).
• Sampling Protocols. For Anchois-2, the inside information was partly established through an email attaching a "draft... RDT programme placeholder" that "detailed potential depths where gas samples should be taken during the wireline run" (page 24, para 4.140).
• Insider List Creation. Tullow's formal notification to Mr. Gerrity that he had been "added to the insiders list" for Jethro-1 is cited as evidence of information possession (page 16, para 4.75).

The Gerrity case reveals how deeply the FCA will delve into operational details to establish inside information possession. For energy and commodity firms, this means that technical and operational communications not just formal announcements or management reports, can form the core of an enforcement case. Compliance teams should understand the following operational indicators and their regulatory significance:

1. Wireline run counts are an indicator of success/failure outcomes

The drilling programme for Prospect S specified different wireline logging scenarios: "one or two wireline runs would be completed in the event of a'dry hole' scenario, whilst five wireline runs would be completed in a 'success case' scenario". When Mr. Gerrity messaged "Probably 2 runs wireline," he was effectively communicating to anyone familiar with the drilling programme that the well had failed. This seemingly innocuous operational reference became central evidence in the FCA's case. Firms should recognise that wireline programmes, completion procedures, and other operational contingencies often contain embedded signals about project successor failure. Personnel who understand these signals possess inside information, regardless of whether they have seen formal geological interpretations.

2. Equipment demobilisation decisions reveal inside information

The FCA cited discussions about "demobilisation of the equipment and personnel required to test oil samples" as direct evidence that Mr. Gerrity knew no oil had been discovered. If oil had been found, sampling equipment would be needed while if it was being packed up, the presumption was no oil had been found. This principle extends beyond drilling to any operational context where equipment deployment or personnel movements are contingent on project outcomes. In trading contexts, vessel chartering decisions, storage bookings, or logistics arrangements may similarly reveal commercial intentions before formal announcements. Compliance teams should map the operational decisions in their business that are outcome-dependent and ensure personnel understand these carry informational content.

3. Budget reforecasting to "success case" or "minimum work programme" may constitute inside information

While the Gerrity case focused primarily on technical data, the underlying principle extends to financial and budgetary indicators. Drilling programmes typically include different cost scenarios e.g. a minimum work programme (dry hole) and a success case (requiring additional appraisal, testing, and potentially development expenditure). When project teams shift from one budget scenario to another, this reflects a substantive change in expectations about drilling outcomes. Personnel involved in budget reforecasting, AFE (Authority for Expenditure) amendments, or cost allocation decisions may possess inside information even if they have no direct access to geological data. Finance teams working on exploration projects should be included in MNPI training and potentially on insider lists.

4. Insider list notifications are evidence of information possession

Tullow formally notified Mr. Gerrity that he had been "added to the insiders list" for Jethro-1, with the notification stating: "As the Jethro-1 well list now relates to price sensitive information you have been added to the insider list specifically for this well". The FCA used this notification as evidence that Mr. Gerrity knew he possessed inside information and not as evidence that the company had discharged its compliance obligations. This is an important distinction in that insider list notifications serve to document awareness, but they do not prevent individuals from trading or absolve them of responsibility if they do. Firms should ensure that insider list notifications clearly communicate that the recipient must not trade, not merely that they have been added to an administrative list.

5. Daily geological reports and well logs are inside information documents

The FCA traced the distribution of Daily Geological Reports, Wellsite Logs, and LWD data through email chains to establish Mr. Gerrity's access to technical information (pages 23-24, paras 4.137-4.141). These routine operational documents circulated daily during drilling operations constitute inside information from the moment they contain data indicating hydrocarbon presence or absence. The implication for firms is that distribution lists for technical reports must be treated as de facto insider lists. Anyone receiving real-time drilling data should be subject to dealing restrictions, regardless of their role or seniority. IT systems that distribute automated reports should be reviewed to ensure recipients are appropriately restricted.

6. The FCA will engage technical experts to interpret operational communications

The sophistication of the FCA's analysis such as cross-referencing WhatsApp messages against drilling programmes, understanding the significance of terms such as "Oil phase kit" demobilisation, and interpreting wireline run counts all demonstrate that enforcement teams have access to sector expertise. Regulators are not limited to understanding explicit statements like "we found oil" or "the well is dry." They will decode technical shorthand, operational jargon, and implied meanings with the assistance, it is assumed, of expert consultants. Firms should assume that any communication, however technical or abbreviated will be interpretable by regulators. Training programmes should emphasise that operational shorthand carries the same regulatory significance as explicit statements, and that the use of technical language provides no protection against enforcement. In addition, firms may wish to enhance their e-communication and voice communication surveillance policies to identify and flag these types of conversations and cross-reference with Personal Account Dealing (PAD) submissions, as discussed in the earlier section on 'Enhancing Trade Surveillance.'

Theme 6: Penalty Calculation Under DEPP 6.5C

The Gerrity case provides a complete worked example of the FCA's five-step penalty framework for market abuse by individuals under DEPP 6.5C. The final penalty of GBP 309,843 comprises disgorgement plus a deterrence element.

• Step 1: Disgorgement. The FCA calculated Mr. Gerrity's direct financial benefit at GBP 128,765, which "includes secondary benefit gained by Mr Gerrity" (page 40, para 6.7). This figure represents the starting point before any deterrence element is added.
• Step 2: Seriousness. The FCA assessed seriousness at Level 4 (out of 5), based on impact factors, nature factors, and deliberate conduct factors. At Level 4, the profit multiple is 3. The profit figure was GBP 86,227.62, yielding a Step 2 figure of GBP 258,682.86 (page 44, para 6.22). Contributing factors leading to the Level 4 assessment included:
  • The market abuse was intentional, in that the individual intended or foresaw that the likely or actual consequences of his actions would result in market abuse (DEPP 6.5C.2G(13)(a)): Mr Gerrity was aware of the regulations relating to the use of inside information as a result of his familiarity with Gaia’s Code of Conduct and would have recognised that he was in possession of inside information on each of Occasions 1 to 4;
  • The individual intended to benefit financially from the market abuse, either directly or indirectly (DEPP 6.5C.2G(13)(b)): Mr Gerrity intended to directly benefit from the market abuse;
  • The individual knew that his actions were not in accordance with exchange rules, share dealing rules and/or the firm’s internal procedures (DEPP 6.5C.2G(13)(c)): Mr Gerrity knew that his actions contravened Gaia’s Code of Conduct;
  • The individual’s actions were repeated (DEPP 6.5C.2G(13)(g)): Mr Gerrity’s actions were repeated on four occasions; and
  • With regard to insider dealing falling within Article 14(a) of UK MAR, the individual knew or recognised that the information on which the dealing was based was inside information (DEPP 6.5C.2G(13)(h)): Mr Gerrity knew or recognised that the information on which his dealing on Occasions 1 to 4 was based, was inside information.
• Step 3: Aggravating/Mitigating Factors. The FCA found "no aggravating or mitigating factors that are applicable in this case" (page 44, para 6.24).
• Step 4: Deterrence Adjustment. No uplift was applied: "the Step 3 figure of GBP 258,682.86 represents a sufficient deterrent" (page 44, para 6.27).
• Step 5: Settlement Discount. Mr. Gerrity received a 30% Stage 1 settlement discount, reducing the deterrence element to GBP 181,078. Added to disgorgement of GBP 128,765, the total penalty is GBP 309,843 (page 45, paras 6.30-6.31).