A former British ambassador and governor to the Falkland Islands who confessed to insider dealing has been spared a criminal prosecution.

Richard Ralph, the former ambassador to Romania and Peru, was fined £117,691 after admitting to insider dealing in the shares of Monterrico Metals, the AIM-listed mining company that he chaired.

The Financial Services Authority said yesterday it might have launched a criminal prosecution against Mr Ralph but for his full confession and cooperation. The offence carries a maximum penalty of seven years.

Mr Ralph came to prominence in 2002 for his part in the Lakshmi Mittal “cash-for-favours” scandal. There were calls for his sacking by the Conservatives after it emerged he had drafted the letter from Tony Blair lobbying the Romanian Government on behalf of Mr Mittal only days after the steel tycoon had given £125,000 to the Labour Party.

Mr Ralph was caught after asking a friend to buy shares in Monterrico in early 2007, knowing that the price was about to soar once a takeover bid for the company was made public. Monterrico was in takeover talks with Zijin, a Chinese mining company. As executive chairman of Monterrico Mr Ralph knew that Zijin had offered a much higher price than the prevailing market price.

Filip Boyen, a friend of Mr Ralph’s who bought the shares, has also been fined £81,982.95 by the FSA. The FSA found that Mr Ralph asked his friend to buy shares, worth about £30,000, in order to conceal his true identity. He had been warned by company advisers about restrictions on directors’ dealings. As well as buying the shares for Mr Ralph, Mr Boyen bought shares for himself worth £77,162.05. After a takeover deal was announced to the market, Mr Boyen sold both men’s holdings, generating a collective profit of £42,174.36.

The fine, which would have been 30 per cent higher without the full cooperation and an early settlement by the two men, is the third highest to be levied by the FSA for insider dealing.

Mr Boyen was an experienced investor and businessman, according to the FSA.

Margaret Cole, the director of enforcement at the FSA, said: “Mr Ralph held a position of trust as the executive chairman of Monterrico but he deliberately used inside information about his company’s takeover for financial gain. Mr Boyen misused inside information about Mr Ralph’s secret dealing to his own advantage by buying more shares for himself.

“This sort of self-serving behaviour by experienced business professionals has the potential to damage confidence in financial markets.”

The regulator, which last year embarked on a highly public crackdown against market abuse, has since then levied several fines for insider dealing, two of them this year. In July, the FSA fined John Shevlin, an IT technician at the Body Shop, £85,000 for insider dealing in the high street retailer using contracts for difference. In September, it fined Steven Harrison, a former hedge fund manager, £52,500 for inadvertently receiving insider information.

Both Mr Ralph and Mr Boyen accepted their wrongdoing and have agreed to pay their fines.

Mr Ralph’s fine consisted of £12,691, which was the profit he made on the deal, plus a penalty element of £105,000.

On January 26 Zijin and Mr Ralph agreed a takeover price of 350p a share in principle. Soon after he asked Mr Boyen to buy on his behalf and he did in two deals at 236p and 262¼p. The shares were sold at 350p when the Zijin offer was made public.

Mr Ralph has acknowledged that he knew that what he was doing was wrong and apologised unreservedly, the FSA said. It added: “The FSA has decided not to prosecute Mr Ralph for the criminal offence of insider dealing in light of the high degree of cooperation he has provided to the FSA’s investigation.”

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