Legal News

Toothless No More? FSA?s Sweep Sends Signal on Insider Trading

By Ashby Jones

On the white-collar front, it’s starting to look a lot like, well, the 1980s all over again.

Back in the era of Reagan and Thatcher, hair bands and Ray-Bans, insider trading was the financial crime du jour. The early aughts brought us accounting shenanigans, the late aughts Ponzi schemes. But it appears that, like skinny jeans, insider-trading prosecutions are back.

The latest: On Tuesday, U.K. authorities arrested six men-including an employee of U.S. hedge fund Moore Capital Management, another from Deutsche Bank and a third from a company affiliated with French bank BNP Paribas - in what the government billed as a major crackdown on insider trading in London’s financial center. Click here for the WSJ story.

According to the Journal reports, it was a big and well-coordinated crackdown, the type you’ve seen in movies, with agents fanning out to a whole bunch of addresses at dawn. Some 143 agents from the Financial Services Authority and the Serious Organised Crime Agency moved across London and southern England Tuesday to arrest the suspects at their homes and to execute search warrants.

The FSA, the U.K.’s primary regulator of financial institutions and markets, trumpeted the insider-trading case as its largest ever.

The raids were the latest evidence of a global crackdown on insider trading. In the U.S., securities regulators and law-enforcement agents have exposed and are prosecuting what they allege is a vast insider-trading ring that centered on New York hedge fund Galleon Group.

Insider trading appears to be a persistent problem in the U.K. The FSA said in its 2008-2009 annual report that it had found 29.3% of corporate announcements in 2008 were preceded by abnormal movements in the companies’ share prices, up from 28.7% in 2007 and 23.7% in 2005.

The FSA’s chief executive, Hector Sants (pictured), has been striving to overcome the agency’s reputation as a toothless overseer of the financial district.

“There is a view that people are not frightened of the FSA,” Sants said last March. “I can assure you that this is a view I am determined to correct. People should be very frightened of the FSA.”

Full post as published by Law Blog - WSJ.com on March 24, 2010 (boomark / email).