U.K. FSA Arrests Legal & General Employee in Trading Probe
A Legal & General Investment Management Ltd. employee was arrested in London and three premises were searched as part of the U.K. markets regulator’s highest-profile insider-trading investigation.
The man was released on bail after he was interviewed under caution at a London police station, the Financial Services Authority said in an e-mailed statement today. The FSA and the Serious Organized Crime Agency searched an office and home in London and a residence in Kent, an area southeast of the British capital.
“A 44-year-old man employed by Legal & General Investment Management was arrested on 16 February and released on bail pending further enquiries,” the company said today in an e- mailed statement. “We are not aware of any detriment caused to customers or any impact on our financial results.”
The case relates to an insider-trading investigation where employees from Deutsche Bank AG (DBK), Exane BNP Paribas and Moore Capital Management LLC were arrested in March 2010. 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 today.
The agency is probing whether the men used knowledge of upcoming securities sales to engage in the front running of block trades, generally on behalf of a corporate client, to generate a profit for themselves. The case is codenamed Tabernula, Latin for “little tavern.”
Front running is a practice in which a trader takes a position to capitalize on advance knowledge of a sale that is expected 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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