Mark Lyttleton, who previously ran a £2bn fund for the asset manager’s UK unit, pleaded guilty on Wednesday to using inside information to trade in the securities of EnCore Oil and Cairn Energy, as alleged in an indictment at Southwark Crown Court.

A third count with which he was charged in September was dropped by the Financial Conduct Authority.

He used inside information on a proposed takeover of EnCore, an Aim-listed North Sea explorer, to deal in 175,000 of its shares in October 2011, according to the indictment. A month later, he found out about Cairn’s discovery of oil in Greenland and dealt in call options, the indictment added.

Wearing a dark suit, Lyttleton, 45, was bailed until his sentencing in December. While the maximum sentence for insider trading is seven years, Judge Anthony Leonard said his early plea would be taken into account. Paddy Gibbs QC, Lyttelton’s barrister, also said a psychological evaluation would be submitted.

His guilty plea comes after a three-year investigation by the FCA that spanned the UK and Switzerland. Lyttleton was first arrested in 2013, along with his wife Delphine. Swiss authorities also searched properties in Switzerland at the time. No other individual was charged and Mrs Lyttleton was dropped from the FCA’s inquiries early last year.

The Financial Times previously reported that the FCA was examining whether Lyttleton gleaned confidential information on energy stocks from his job at the asset manager that he then used to trade on his own account through a broker in Switzerland.

Premier Oil made a £221m offer for EnCore in October 2011. Cairn meanwhile said in late November 2011 that a $600m exploration campaign to find oil and gas in the waters off Greenland had ended in failure, causing its shares to drop 1 per cent.

“Lyttleton was able to use the inside information to inform his purchase of shares a short time before any public announcement was made about the stocks concerned,” the FCA said in a statement. “The trading was conducted by Mr Lyttleton through an overseas asset manager trading on behalf of a Panamanian registered company.”

Monty Raphael QC, of the law firm representing Lyttleton, declined to comment on behalf of his client outside court.

It is a sharp fall from grace for Lyttleton, one of BlackRock’s biggest stars in the last decade, winning kudos for managing its UK Dynamic and Absolute Alpha portfolios. The latter topped the Cofunds’ bestseller list for June 2008 and its assets swelled from £300m to £1.4bn in just over a year.

A former colleague of his told the FT: “He was definitely considered a rising star at the firm and when he was first arrested it caused a massive stir within the company. It was strange because he was very understated and quiet, not flashy like some other fund managers at the company, and so it was a real shock.”

But the funds struggled after the financial crisis, and UK Dynamic was singled out as a “dog” by financial advisers Bestinvest in 2011.

He had left BlackRock before his arrest in 2013 for reasons unrelated to the investigation, the asset manager said at the time.

BlackRock said on Wednesday that the offences related to “actions carried out in 2011 for his personal gain, while off our premises, and that neither BlackRock nor any employee was under investigation. There was no impact to any of BlackRock’s clients as a result of the alleged actions. The alleged behaviour is totally contrary to the firm’s principles and values, and we strongly support aggressive enforcement of the law in these matters”.

The FCA has now secured 30 convictions for insider trading, a crime it had never prosecuted before 2008. Earlier this year a £14m case resulted in four convictions — including of former senior employees at Deutsche Bank and Moore Capital — and three acquittals.

That case, dubbed Tabernula, was the first big trial of insider trading in nearly four years, as the regulator’s resources were diverted away from such investigations to the sprawling probes into the rigging of Libor and foreign-exchange benchmarks.

Earlier this summer, the FCA revealed that abnormal movements in share prices ahead of public takeover announcements were at their highest level in five years — a possible side-effect of a dearth of big cases, which the regulator has said have a deterrent effect on would-be insider traders.