City regulators have fined Regal Petroleum a record £600,000 after a damning report covering two years when the oil explorer was controlled by Frank Timis, the controversial businessman, The Times has learnt.

The report, expected to be published today, found that the AIM-listed Regal had issued a string of misleading stock market announcements that drove up the share price more than 500 per cent but ultimately led to investors losing hundreds of millions of pounds.

According to the report: “The number, nature and duration of the breaches demonstrate a systematic pattern of conduct evidencing a reckless disregard for the AIM rules by Regal.”

Regal, under new management and with plans to join the main market, has received the largest fine imposed on an AIM company. The report, by the Stock Exchange’s AIM Disciplinary Committee (ADC), covers Regal bet-ween June 2003 and May 2005, when Mr Timis was chairman and chief executive, and Evolution, the stockbroker, was the company’s adviser.

Although the report is scathing about Regal, neither Mr Timis nor Evolution are named, despite many investors believing that they were misled. It is thought that the ADC’s remit did not include holding past directors and third parties accountable.

The Romanian-born Mr Timis, 46, who was twice convicted in the early 1990s for having heroin with intent to supply, founded Regal in 1996. The company hit notoriety after it floated on AIM in 2002 at 60p a share.

Regal bought rights to look for oil in Greece and later released a series of positive reports on drilling prospects. It raised more than £100 million in three placings and Regal’s share price hit 510p. However, in May 2005 Regal said that a key oil well was “non-commercial”. The shares fell by 65 per cent. The ADC’s report says that the episode “caused considerable damage to the integrity and reputation of AIM as a whole”.

The London Stock Exchange and the Financial Services Authority began investigations. They agreed last year that the FSA would drop its inquiries and leave things to the ADC.

The ADC has concluded that Regal “failed to take reasonable care to ensure that” stock market statements were “not misleading, false or deceptive”. Statements on oil exploration prospects were “consistently overoptimistic” and “used language that created a misleading impression as to the potential commercial viability of the Kallirachi [well in Greece]”.

The ADC says that Regal made 11 market announcements deemed to be “serious” breaches of AIM rules.

Mr Timis resigned in June 2005. He still owns an 8.8 per cent stake in Regal.

The ADC did acknowledge that Regal’s senior management “has undergone significant changes”.

Regal declined to comment. A spokesman for Mr Timis said that his client was out of the country and had no comment.

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