U.K. Insider-Trading Investigations Set Record as FCA Cleans Up

  • British regulator opened 84 insider-dealing probes in 2017
  • FCA has been cracking down on behavior over the last decade

Photographer: Chris Ratcliffe/Bloomberg

Junk your laptop and hide your phone; the U.K. markets watchdog opened another record number of insider-dealing investigations in 2017.

The Financial Conduct Authority started 84 of the probes this year, the most ever in a 12-month period, according to a freedom-of-information request by Bloomberg. The figure, which is based on cases started through Dec. 7, breaks last year’s record high of 70 new investigations.

The number of probes has risen dramatically since enforcement chief Mark Steward took over the helm two years ago. Under him, the regulator has moved away from cherry-picking cases for deterrence purposes, instead attempting to pursue all leads regardless of the outcome. As well as increasing the number of investigations, the strategy has also seen a record 56 cases closed this year, according to the data.

The FCA has "changed its approach in recent years. It seems much more prepared and far keener to tackle the more tricky, difficult or complicated cases," said Azizur Rahman, senior partner at London law firm Rahman Ravelli. "The FCA is also using more sophisticated investigation methods, with surveillance in increasing use."

The agency changed how it classified cases in March 2013. Previously, a probe into a firm and its employees would count as one investigation. Since 2013, the FCA has counted them separately.

A spokesman for the FCA declined to comment beyond a speech Steward gave in September where he discussed the regulator’s new approach to opening investigations. In the talk, Steward dismissed the idea that more investigations would require additional resources, claiming it wasn’t necessary or pragmatic in light of resource constraints with Brexit.

The FCA has racked up more than 30 convictions for insider dealing since 2009, when it first prosecuted the behavior. After a few early successes against low-profile individuals, the agency went after a number of well-known traders from top investment banks and hedge funds.

In the biggest-ever U.K. insider dealing probe, dubbed Operation Tabernula, the FCA successfully prosecuted five out of eight defendants, including a former Deutsche Bank AG corporate broker. Last year, he received a sentence of 4 1/2 years, the longest-ever U.K. penalty for the crime.

Britain isn’t alone in trying to combat the offense. U.S. prosecutors have gone after insider traders hard over the last decade, catching a number of famous names along the way. Las Vegas gambler Billy Walters, once the most successful sports bettor in the country, was sentenced to 5 years in prison this year.

France has also been cracking down on the behavior. The Autorite des Marches Financiers opened 12 new investigations this year, according to an agency spokeswoman.

In the last week a broker who worked at Louis Capital Markets and an Israel-based investor were fined a combined 946,000 euros ($1.1 million) for insider dealing, while a former Standard & Poor’s analyst was fined 90,000 euros after admitting that he used his mother’s bank account to place questionable trades.

— With assistance by Gaspard Sebag

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