U.K. FSA Targeting London’s ‘Bigger Fry’ in Insider-Trade Probes
U.K. FSA Targeting London’s ‘Bigger Fry’ in Insider-Trade
Jason Alden/Bloomberg
The FSA is imposing stricter supervision after being criticized for failing to prevent the U.K.’s worst financial crisis since the Second World War.
The FSA is imposing stricter supervision after being criticized for failing to prevent the U.K.’s worst financial crisis since the Second World War. Photographer: Jason Alden/Bloomberg
London City
Chris Ratcliffe/Bloomberg
Tower 42, left, the Swiss Re building, also known as the "Gherkin", center right, and the Heron tower, right, stand in the City of London.
Tower 42, left, the Swiss Re building, also known as the "Gherkin", center right, and the Heron tower, right, stand in the City of London. Photographer: Chris Ratcliffe/Bloomberg
The U.K.’s Financial Services Authority will focus its insider-trading investigations on senior London financial workers as part of its deterrence strategy, the finance watchdog’s acting enforcement chief said.
The FSA, which was set up in 1997 and prosecuted its first criminal case of insider trading in 2008, is “determined to take insider dealing enforcement right into the heart of the city,” Tracey McDermott, acting head of enforcement at the FSA, said in an interview in London yesterday, hours before Galleon Group LLC co-founder Raj Rajaratnam was convicted in New York of insider trading.
“We recognize the need to go after bigger fry, not because they’re wealthy or high profile -- we want to go after the people we actually think are causing the most damage to the market,” said McDermott, who took over earlier this year from Margaret Cole, who has gone on to lead another agency unit.
The FSA is imposing stricter supervision after being criticized for failing to prevent the U.K.’s worst financial crisis since the Second World War. The regulator in February secured the longest-ever U.K. sentence for insider trading when former Dresdner Kleinwort banker Christian Littlewood was imprisoned for 40 months after admitting illegally trading over a 10-year period, along with his wife and an accomplice.
“The FSA needs to be able to deploy the right tools,” Carlos Conceicao, a financial-services partner at Clifford Chance LLP, said in a telephone interview. “The Galleon prosecutors used wiretaps, which shows that if you’re going after sophisticated people you need sophisticated tools to gather evidence.”
14 Counts
Rajaratnam, the hedge-fund tycoon at the center of a U.S. insider-trading crackdown, was found guilty on all 14 counts against him in the illegal stock-tipping case. He faces 15 1/2 years to 19 1/2 years in prison, according to prosecutors.
“If the FSA wants to send out clear messages of deterrence, then catching market professionals is absolutely the right strategy,” said Conceicao, a former FSA enforcement director.
The FSA has “a number of cases concerning commodities derivatives on the go,” said McDermott, adding that “one of the difficulties is around proving market manipulation, as quite often people will try and manipulate the market and not succeed.”
National regulators in the 27-member European Union may get powers to take action against traders who attempt to manipulate the market under proposals from the European Commission to review market abuse laws, due to be published as soon as July.
The FSA fined former PVM Oil Futures Ltd. broker Steven Perkins 72,000 pounds ($118,000) for trading without client authorization and lying to his employer about it while going on drinking binges.
To contact the reporter on this story: Ben Moshinsky in London at bmoshinsky@bloomberg.net;
To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.
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