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Legal & General’s Milsom Said to Be Arrested in Trading Probe

Legal & General Group Plc’s Paul Milsom, a trader at the insurer’s investment-management arm, was the man arrested yesterday as part of a probe into insider trading, according to a person with knowledge of the case.

Milsom, who works on Legal & General’s equity-trading and sales desk in London, was released on bail pending further enquiries, said the person, who declined to be named because details of the case are confidential. Legal & General confirmed that a 44-year-old employee was arrested and released on bail in a statement published yesterday evening.

“We are not aware of any detriment caused to customers or any impact on our financial results,” Legal & General said. Richard King, a Legal & General spokesman, declined to comment on the man’s identity or position at the firm.

The man was released after he was interviewed under caution at a London police station, the Financial Services Authority said in an e-mailed statement yesterday. The FSA and the Serious Organized Crime Agency searched an office and home in London and a residence in Kent, southeast of the British capital.

Colleagues who answered Milsom’s phone declined to comment on the case. Milsom didn’t immediately respond to a request for comment left with his co-workers. Efforts to determine if Milsom had retained an attorney were unsuccessful.

The case is the FSA’s highest-profile investigation into insider trading. Employees from Deutsche Bank AG, Exane BNP Paribas and Moore Capital Management LLC were arrested in March 2010.

Further Searches

Those questioned include Julian Rifat of Moore Capital, Deutsche Bank’s Martyn Dodgson, Exane’s Clive Roberts, Novum Securities Ltd.’s Graeme Shelley and Iraj Parvizi, a director at Aria Capital Ltd. No one has been charged in the case.

The FSA conducted further searches in April 2011 and arrested someone at the time, the regulator said yesterday. The case is codenamed Tabernula, Latin for “little tavern.”

The agency is probing whether the men used knowledge of upcoming securities sales to engage in so-called front-running of block trades, generally on behalf of a corporate client, to generate a profit for themselves. Front-running is a practice in which a trader takes a position to capitalize on advance knowledge of a transaction large enough to influence the price of securities.

Bankers typically alert select money managers to planned sales of securities before companies disclose them. The guidance they get from fund managers helps underwriters measure demand for the securities so they can better price them.

The FSA, which is to be replaced by two new regulatory agencies next year, has been issuing more fines and pursuing more criminal cases after being criticized for its leniency during and after the global financial crisis that reached its height after the 2008 collapse of Lehman Brothers Holdings Inc.

The agency fined banks including JPMorgan Chase & Co., UBS AG and Barclays Plc for financial rule breaches and levied its largest penalty ever against an individual in November.

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