Prudential has been hit with a £30 million fine after it kept regulators in the dark over plans for a business-changing Asian takeover.
The insurer's chief executive Tidjane Thiam was also censured after the Financial Services Authority (FSA) complained it had not been told about the 2010 bid for AIG's Asian subsidiary AIA in a move worth £23 billion.
Prudential should have informed the FSA at the earliest opportunity in order to allow the watchdog to decide on whether to approve or reject any deal.
In one of its last actions before it is replaced by the UK's new regulatory regime on Monday, the FSA said Prudential and Mr Thiam's failings represented a "serious error of judgement" for which the company is now paying the price.
The ill-fated deal, which eventually collapsed amid shareholder uproar, would have involved a UK record shareholder cash call of £14.5 billion and transformed the group's financial position, according to the FSA.
It added: "The transaction had the potential to impact upon the stability and confidence of the financial system in the UK and abroad."
The Pru was overly influenced by its concern about the risk of leaks, despite being told by advisers about the importance of keeping the regulator informed.
Pru chairman Paul Manduca, who joined the company in the wake of the failed deal, said Mr Thiam had acted in the best interests of the company and with full knowledge of the board.
He added: "Prudential works hard to maintain close and positive relationships with its regulators, and the group's relationship with the FSA continues to be good. The FSA has determined that it should have been informed earlier about the fact we were contemplating the AIA transaction and we regret, with hindsight, not so doing."