The Financial Services Authority (FSA) has apologised for comments made by staff and its overall conduct during a meeting with an unnamed firm.
The regulator accepted it "fell short of the standards we set ourselves" during the meeting on 5 March last year after the complaints commissioner Sir Anthony Holland upheld the firm's complaint.
The meeting had been set up to discuss the processes the firm had in place to recognise suspicious trades, though the company said this had not been made clear to it and that FSA staff then proceeded to behave unprofessionally.
One remark - a reference from a member of the FSA team to individuals being sent "to jail" for market abuse - was provocative and intimidating, the company said.
Holland upheld the firm's complaint, agreeing the conduct of the "more senior" members of the FSA team had been unacceptable, though he added one member of the team representing the company was not "entirely without responsibility for what occurred".
The regulator said in a statement: "The FSA strives to be an open and transparent regulator, holding itself to the highest standards expected from those firms it regulates.
"We recognise the significant powers we have and the responsibilities they bring with them. We want to ensure that we exercise those in a fair, proportionate and professional way.
"Where we fall short of that, however, we will learn from our mistakes and change how we work. On this occasion we fell short of the standards we set ourselves, which we regret."
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