Eight arrested in insider dealing investigation

Eight arrested in insider dealing investigation

Eight people suspected of being involved in an insider dealing ring have been arrested in dawn raids in London and the south-east of England.

The swoop is part of an effort by the Financial Services Authority to get tough on insider dealing, the illegal trading on price sensitive information not available to the wider market.

In a brief statement, the FSA said the operation, the biggest of its kind in the UK, had involved 40 staff, with back-up from City of London Police officers. The eight individuals are all men aged between 27 and 48 and are understood not to be employed in any of the big banks.

In a speech last month, Margaret Cole, the director of enforcement at the FSA, said the regulator intends "to be bolder and more resolute about proceeding with market abuse and insider dealing cases to bring about a change in the culture of the City." She admitted that the threat of civil fines had not been a strong enough deterrent and signalled a shift to more criminal prosecutions. "If people have to go to prison for us to achieve that aim then that's what we are prepared to do."

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The maximum prison sentence for insider dealing is seven years, and those found guilty are also liable to an unlimited fine. The FSA has had powers to prosecute those engaged in insider dealing through the criminal courts since 2001 but has only begun using those powers this year. Since January, it has brought three criminal prosecutions for insider dealing.

Insider dealing is notoriously difficult to prove and is thought to be rife in the City. Figures from the FSA show unusual share price movements before almost 29% of takeover announcements last year.

The FSA has beefed up its criminal prosecution team from 12 to 30 and has asked the government for powers to allow suspects to plea bargain, copying the American system which has been much more successful in cracking down on rogue traders.

FSA chief executive Hector Sants, told a treasury select committee in May, that he was determined to "remove the misconception that we are a light touch".

Former Cazenove partner Malcolm Calvert last week appeared before Westminster magistrates on charges of insider dealing between April 2003 and March 2005. Calvert, who retired from Cazenove in 2000, is charged with receiving inside information before buying shares in companies including HP Bulmer, and Johnson Group. Calvert, who indicated he would plead not guilty, was remanded on bail.

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