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Financial workers held in FSA's 'biggest ever' swoop on insider dealers

By James Moore

The Financial Services Authority stepped up its crackdown on insider trading yesterday with a series of dawn raids around London and the Home Counties that led to six arrests.

It emerged last night that at least one of those arrested worked at Deutsche Bank with another employed at the hedge fund Moore Capital.

The FSA said it believed the six City professionals had passed inside information to traders, either directly or via middlemen. The traders then used the information to inform their trading decisions and net "significant profits" according to the watchdog.

Moore Capital said in a statement last night: "This morning representatives of the FSA were at our London office to serve a search warrant for documents relating to an employee of Moore Europe working as an execution trader on its London Equity Execution desk.

"We understand from the FSA that the investigation concerns possible insider dealing and the investigation of the employee does not involve any of the funds managed by Moore Capital. Moore is co-operating fully with the FSA in its investigation.

"The employee has been placed on administrative leave pending completion of the investigation."

Deutsche Bank said it was "co operating with the authorities". For the first time, agents from the FSA acted in co-operation with police from the Serious Organised Crime Agency (Soca). It marks the biggest enforcement operation yet carried out by the FSA, which has been keen to show that it is having an impact on wrongdoing in Britain's financial centre. The operation was carried out by 143 FSA personnel, together with Soca officers. The two agencies began their investigation in late 2007. The arrests came just a year after the FSA's outgoing chief executive, Hector Sants, warned the City to "be afraid, be very afraid" in a speech that heralded the recent crackdown.

The regulator had previously come under pressure from critics who argued that it had landed relatively few scalps for insider trading, despite being given enhanced powers under the Financial Services and Markets Act to pursue people engaged in the activity.

Under the Act, the FSA was given the ability to fine and ban people from working in the City under a civil regime, which requires it only to show wrongdoing "on the balance of probabilities". However, under the recent crackdown the FSA has sought to launch full-scale criminal prosecutions.

The watchdog has so far secured five jail sentences, one of them suspended, relating to insider dealing. The most recent was handed to Malcolm Calvert. Calvert, a former banker at the Queen's stockbroker Cazenove, was convicted at Southwark Crown Court earlier this month and jailed for 21 months.

A colourful character, Calvert, 65, was known in the Square Mile as "Streaky" because of his habit of racing around trading floors as a junior trader. He also faces a fine as part of an attempt to recover the money he made after passing on price-sensitive information about companies to a friend, who then invested on his behalf. Calvert has said he will appeal against the 21-month term, which his lawyers have described as "excessive".

The Conservatives have pledged to abolish the FSA should they win the next election, transferring many of its powers for supervising banks to the Bank of England, while creating a "Consumer Protection Agency".


Belfast Telegraph


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