Authorities in the UK have arrested seven suspects in what is being marked as the largest insider-trading case ever for the Financial Services Authority. The FSA is the UK’s primary financial institution regulator that has recently been criticized for lacking oversight over the financial district in London. The FSA is now attempting to establish a reputation for hard hitting raids on illegal insider trading cases.
The agency reported to The Wall Street Journal that the arrest “targeted a sophisticated and long-running insider-dealing ring that netted participants significant profits.” Among the seven men arrested was an employee of the US Hedge Fund Moore Capital Management, another from Germany’s Deutsche Bank, and a third from the French Bank BNP Paribas.
The investigation, which has been underway since late 2007, involved approximately 143 agents from the FSA and the Serious Organised Crime Agency. The agents spanned out across London early last week and arrested all the accused at their homes and fulfilled the 16 warrants on homes and businesses in search of case sensitive documents and records.
This investigation is actually the first in which the FSA and the SOCA have collaborated on a case, and they have refrained from releasing details as of yet regarding the extent of illegal insider-trading that occurred.
Insiders of the Deutsche Bank, which specializes in sales and trading of bonds, equities and debt financing in their London based operations, say they are completely cooperating with the authorities in regard to the suspicions that one of their employees was involved with the scandal. The Paris-based brokerage firm, Exane, was also among the companies involved with the arrests specializing in equity derivatives and asset management. Exane is admitting that one of their employees has been questioned by the FSA but they have refrained from further comment until more information is available.
Julian Rifat, of the New York-based Moore Capital, is a London execution trader who was also arrested earlier this week for his supposed involvement in the case. Moore Capital told The Wall Street Journal, “UK authorities had executed a search warrant for documents related to an employee on its London equity-execution desk.” However, Moore Capital has made it evident that the investigation has nothing to do with the hedge fund’s capital and that they are more than willing to cooperate fully with the FSA.
The suspects are currently being held in police stations around London. However, none have been convicted of any crimes as of yet. Agents are continuing to question the suspects and will soon prosecute the suspects when they have established ample evidence.
Only recently has the FSA gained power to prosecute such criminals, bringing their first case in 2008 to court. They have executed about 6 similar raids in recent years concerning mainly small scale insider-trading operations. All of these similar raids are a direct response to a global crackdown on insider trading. American securities regulators are dealing with similar cases of insider trading centered mainly on New York hedge fund Galleon Group.
It is very apparent that insider trading has become an increasingly prevalent problem in the UK, and the FSA will have to continue to crackdown on many companies and banks in order to promote free trade in a free market.