UPDATE 1-UK regulator fines Photo-Me for disclosure delay

* FSA fines Photo-Me 500,000 stg

* Photo-Me says will not appeal, disappointed at fine size

(Adds Photo-Me statement, share price)

LONDON, June 21 (Reuters) - Britain's financial regulator has fined photo booth maker Photo-Me (PHTM.L) 500,000 pounds ($741,500), the largest fine of its type, for a delay in disclosing inside information. The Financial Services Authority said the firm had information in January and February 2007 that it was no longer in exclusive discussions for a contract for its 'minilab' processing equipment and that minilab sales were behind expectations.

The FSA said Photo-Me did not issue a profit warning until March 2, thereby creating a false market in its shares for 44 days.

No past or current directors of Photo-Me have been found guilty of any regulatory breaches, it added.

"Inside information must be announced to the market as soon as possible to allow investors the opportunity to make informed investment decisions," Margaret Cole, director of enforcement and financial crime at the FSA, said in a statement on Monday.

The FSA, which has been stepping up its efforts to crack down on market abuse, will cease to exist in its current form under plans for a radical shake-up of financial regulation announced by Britain's new coalition government. [ID:nLDE65G0HM]

Photo-Me said it was disappointed with the size of the fine and that the FSA had underestimated the difficulties it faced in updating the market on the possible outcome of the contract negotiations, but that it would not pursue an appeal.

It said that the fine would not have a material impact on its results for the year to April 30, 2010, as it had already booked an expense of 500,000 pounds in connection with the case for the year to end-April 2009.

"Whilst the company is disappointed with the quantum of the penalty it welcomes the fact that the FSA has not found that any directors or previous directors were at fault in this matter," the company said.

Photo-Me's shares were down 0.7 percent at 33.5 pence at 1009 GMT, valuing the company at about 121.6 million pounds. (Reporting by Victoria Bryan, Editing by Rosalba O'Brien) ($1=.6743 Pound)