Posts Tagged ‘UK’

Times Online writes that The Serious Organised Crime Agency raids on some of banking’s big names have sent shock waves through the City of London.

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The men are suspected of being part of what the watchdog has described as a “sophisticated and long-running insider dealing ring”. The FSA believes the ring made “significant profits” by trading on secret information.

This was the fifth set of arrests since it launched a crackdown two years ago, though this is markedly different from the others. Previous efforts have homed in on fringe players — interns at investment banks, retired stockbrokers, silver surfers with online trading accounts, and occasional rogues at second-tier firms.

Last week’s arrests struck at the heart of the City. Dodgson, 38, is known by the bosses of almost all Britain’s big banks and insurers. He has been a trusted adviser on deals for the likes of HBOS and Legal & General. He even played a bit-part in advising the Treasury on the banking bailout. His CV reads like a roll-call of the City’s biggest investment banks: Cazenove, UBS, Morgan Stanley, Lehman Brothers and Deutsche.

The same is true of the other suspects. Clive Roberts, who was also questioned on Tuesday morning, is head of equities at Exane BNP Paribas. His clients include some of London’s biggest traders, such as Roger Guy, star fund manager at Gartmore.

Julian Rifat, 41, whose Oxfordshire home was raided at 4.45am on Tuesday, is a trader with Moore Capital. Every device in his home that could store information was removed by investigators — including his children’s iPods.

Other suspects include well-known brokers and traders in the AIM market, regularly spotted out and about in City wine bars.

If the FSA can prove its case, it will shake the City to its core.

“I’m absolutely disgusted,” said one senior City banker. “The idea that someone in our line of work could do anything with inside information appals me. We get inside information all the time — it’s part of the job. You assume that everyone respects that. It’s what we do. You simply could not function if you were to spend all your time thinking that members of your team may be trading on that information.”

In the City’s biggest banks, it is assumed that insider dealing is something that happens somewhere else. There are armies of compliance staff monitoring every trade.

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The Guardian wrote that two City workers face fines and a ban from the Square Mile after they used inside information to make more than £85,000 from spread betting on shares.

Robin Chhabra, a former research analyst at Evolution, and his friend Sameer Patel, an investment manager at General Motors Asset Management, were found by a City tribunal to have colluded in using confidential information to make quick profits.

Their punishment is yet to be decided because they had been disputing a finding by the Financial Services Authority that they had committed market abuse. However, the financial services and markets tribunal, which rules on disputes between the FSA and individuals and firms facing regulatory action, upheld the FSA’s case.

Margaret Cole, FSA director of enforcement and financial crime, said: “Chhabra and Patel’s behaviour fell far short of that expected of approved persons. By repeatedly giving Patel privileged information, Chhabra breached the trust of his clients and his employer.

“Patel exploited this information to try to make a quick profit at the expense of other investors. Market abuse is a serious matter and the FSA will continue to pursue and take action against anyone who believes they can make easy money off the back of confidential information.”

The tribunal will hold a new hearing on the “penalties and prohibition orders” against the two men, both aged 38. They have known each other for more than 20 years, acting as each other’s best man, and between 20 April and 3 August 2004 had 165 “telephone contacts”.

Patel, who was using his own money to trade, made £85,541 after placing spread bets on ebookers and Eidos shares following tips from Chhabra, who received inside information at Evolution where he covered 20 stocks.

Some of the gains were made when the companies issued profits warnings during the middle of the trading day – an unusual occurrence, rather than 7am – the tribunal was told by the FSA.

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Times Online writes about a solicitor who tipped off his father-in-law and profited from a takeover deal was jailed for eight months today in the Financial Services Authority’s (FSA) first criminal prosecution for insider dealing. Christopher McQuoid, 40, committed the offence while acting in his professional capacity and in a position of trust, said Judge Peter Testar, passing sentence at London’s Southwark Crown Court.

His father-in-law, James Melbourne, 75, was given the same sentence, but suspended for 12 months, partly because of his age. The lawyer, from Royston, Hertfordshire, and his father-in-law, of, Ripley, Derbyshire, were found guilty of one count of insider trading on Friday.

During a two week trial the court heard that the pair shared a £48,900 profit after McQuoid tipped off Melbourne that his employer, TTP Communications, was about to be taken over by US mobile giant, Motorola.

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1. Introduction 

The EU Market Abuse legislation (directives, regulations and Level 3 guidelines), with the market integrity and investor confidence as its primary objectives, represents a major achievement towards integrated financial markets in EU.

As a matter of domestic legislation and other applicable rules deriving from the Market Abuse legislation, issuers are expected to have adequate preventive measures, systems, procedures and controls in place to ensure discharge of their regulatory obligations and make it as difficult as possible to commit market abuse. The higher the quality of systems and controls implemented by the issuers, the lower the likelihood that their financial instruments become subject to insider dealing or other forms of market abuse.

Given the importance of issuers’ compliance efforts under the Market Abuse regime, it is vital that substantially similar standards and compliance arrangements will evolve to protect investor confidence and market integrity within the EU. A pre-condition for such evolution is an objective understanding about issuers’ anti-market abuse systems, controls and compliance practices as applied on a daily basis.

A survey conducted between February and March 2008 among leading multinational companies listed on the Nordic Market (1)  in cooperation with the City of London, represents an effort to capture such understanding on a regional level.

The survey was conducted by means of confidential questionnaire addressed to general counsels and compliance officers of companies listed on the Nordic Market. The questionnaire focused on selected elements of preventive anti-market abuse systems and controls dealing with:

• identification of inside information within the issuer and its group
• ensuring fair trading by members of the management bodies and employees
• proper handling of inside information and prevention of leaks
• ensuring the quality and reliability of compliance procedures, techniques and record-keeping regarding the above
• internal allocation of responsibilities and tasks regarding the above.

This article summarizes the key-findings of the survey and aims to provide useful comparative information for those in charge of legal and compliance with respect to Market Abuse rules.

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Telegraph writes about Richard Ralph, a former Governor of the Falkland Islands and a past British ambassador to both Peru and Romania, has been fined £117,691.41 by the City regulator after it was discovered he asked a friend to buy shares in Monterrico Metals.

Mr Ralph became chairman of Monterrico in August 2006, shortly before the £93m mining business was taken over by China’s Zijin Consortium. The FSA found that during the takeover talks Mr Ralph asked his friend Filip Boyen to buy about £30,000 of shares in order to conceal his true identity.

At the time, Mr Ralph was closely involved in the takeover talks and was and would have been expected to publicly disclose any dealing in company shares. As well as buying the shares for Mr Ralph, Mr Boyen also bought shares for himself worth £77,162.05. After a takeover deal was announced to the market, Mr Boyen sold both men’s holdings, generating a collective profit of £42,174.36.

Once the FSA began to investigate suspicious trading prior to the takeover, Mr Ralph voluntarily contacted the FSA and admitted to insider dealing. Mr Boyen was fined £81,982.95 and sources said both fines would have been as much as a third higher had it not been for the full co-operation and early settlement by the pair.

Before joining Monterrico, Mr Ralph had a long career as a diplomat, beginning in 1969. He previously hit the headlines when serving as ambassador to Romania after he was embroiled in a controversy surrounding the attempt by steel tycoon Lakshmi Mittal to take over Sidex, a Romanian steel plant.

Hedge Funds Review wrote that Recently the UK Financial Services Authority (FSA) broke new ground by taking action against a hedge fund manager for using inside information to deal in corporate bonds (UK FSA fines hedge fund manager over insider trading, September 9, 2008).

Steven Harrison, the former manager with Moore Capital Management, was fined £52,500 and agreed not to perform any controlled function for a period of 12 months.Although this is not the first time the FSA has taken action against a hedge fund manager for market abuse, it is the first case involving activity in the credit markets.

Hedge funds and their managers need to focus on this case. Two important questions are of immediate concern:

Are hedge funds providing adequate training to enable staff to identify how the market abuse and insider dealing regimes relate to their business?

Do hedge funds have effective procedures in place to identify when they receive inside or restricted information and how to conduct themselves when they do?

Although the FSA found Harrison’s conduct was not deliberate, it did make the point that he “ought to have realised that the information he was given constituted inside information”.

This is an unusually sympathetic view for the regulator given that it had evidence that Harrison had been asked if he “wished to receive restricted information in connection with an upcoming financing”. This was immediately before being given information, which he later claimed he did not identify as inside information, and despite the fact he almost immediately instructed his traders to purchase the bonds to which the information referred.

It is doubtful the FSA will continue to be so sympathetic. Hedge fund managers can expect closer scrutiny in respect of equity markets and credit market transactions.

It has been almost a year since the FSA published its findings of visits to hedge fund managers in Market Watch 24. The visits focused on the controls in place to mitigate the risk of market abuse. The FSA commented it was “disappointed by some of what we saw”.

In April 2008 the FSA’s market cleanliness update reported informed price movements (IPMs) as being just under 30% of all takeovers during 2007. This was up from the previously published 2005 figure of 23.7% which at the time the FSA said remained “a cause for particular concern”.

The FSA’s action was designed to send a clear message of the regulator’s expectations in this area. Given the ‘disappointing’ results from its review of hedge fund’s market abuse controls and the rising instances of IPMs, it can only be a matter of time before the FSA looks for more suitable scalps to underline its credible deterrence message in insider dealing and market abuse.

Fund managers need to think carefully about the consequences of being wall crossed and ensure that if they are they do not become involved in trading affected securities.

Midland businesses have been warned to beware a major new crackdown on insider trading launched by the City regulator, the Financial Services Authority.

The FSA, once criticised for being a toothless watchdog, is now looking to get tough, cautioned Russell Orme, corporate partner in the Birmingham office of law firm DLA Piper.

And he urged bosses to make sure company announcements were done by the book, giving no cause to arouse suspicion. It has been estimated that about a fifth of results announcements and a third of takeovers are preceded by insider trading. But a series of dawn raids and arrests recently suggest the FSA now means business. The raids came just days after the announcement of two further criminal prosecutions for insider dealing.

Matthew Uberoi and Neel Uberoi have been charged with 17 counts of insider dealing in an indictment filed at the City of Westminster Magistrates’ Court. The pair are said to have traded more than 300,000 shares in various companies over a four month period, between May and August 2006, while privy to inside information.

And Malcolm Calvert, a former trader and partner of Cazenove bank, was recently charged with 12 counts of insider dealing over a two-year period following his retirement from the firm. Both cases have been adjourned to September 2008.

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