UPDATE 3-LSE fines Regal Petroleum for misleading investors

* LSE says investors were given misleading information

* Were not informed promptly of dry wells

* Regulator FSA chose not to investigate

* Regal shares rise 2.4 pct

(Adds analysts, FSA comment, shares)

By Tom Bergin

LONDON, Nov 17 (Reuters) - The London Stock Exchange (LSE) fined oil explorer Regal Petroleum (RPT.L) 600,000 pounds ($1 million) for misleading investors in what analysts said was a "slap on the wrist" that failed to punish anyone involved.

The LSE said statements which Regal released between 2003 and 2005, claiming oil reserves of up to 227 million barrels at a Greek prospect, were excessively optimistic.

Regal was slow also in telling investors when drilling revealed an absence of oil, the LSE said.

The news of the dry Greek wells prompted an 80 percent drop in Regal's share price and led investors to force founder and major shareholder Frank Timis to resign as executive chairman.

"The number, nature and duration of the breaches demonstrate a systematic pattern of conduct evidencing a reckless disregard for the AIM Rules by Regal," said the disciplinary authority for London's AIM junior market on which Regal is listed.

Regal said it was disappointed at the outcome of the LSE probe but added it was pleased to put the matter behind it.

"At no point has it been suggested that any of the current management team have conducted their responsibilities in anything other than a proper and professional manner," the company said.

Most of Regal's management and directors have changed since 2005.

"The penalty, which amounts to a slap on the wrist for Regal, draws a line underneath what has been a lengthy debacle, enabling management to focus entirely on the development of the company's core assets in Ukraine," Richard Savage, oil analyst at Mirabaud said.

Regal shares traded up 2.4 percent at 106 pence at 1625 GMT, against a 0.7 percent drop in the DJ Stoxx European oil and gas sector index.

No individual was named in the LSE statement as being responsible for misleading investors.

Current Chief Executive David Greer said, at the time he was appointed in 2007, that Timis, who is still Regal's second-largest investor with 8.8 percent of the shares, had signed an agreement which precluded him from interfering with the operations of the company.

The UK's financial regulator, the Financial Services Authority, which has faced years of criticism that it has failed to target market abuse despite saying this crime was a priority, decided last year not to proceed with an investigation into Regal.

"It was decided that AIM were the best people to take this forward," a spokeswoman for the FSA said.

The LSE noted Regal's nominated adviser (nomad) at the time, Evolution Securities, had been provided with copies of the misleading statements before they were issued.

Evolution declined comment. Timis did not return calls. (Reporting by Tom Bergin; Editing by Greg Mahlich and Jon Loades-Carter) ($1=0.5941 pounds)