Another arrest made in biggest UK crackdown on insider dealing

News - Banking

Written by Ray Clancy

Friday, 26 March 2010 09:11

A seven financial services professional has been arrested in the UK’s largest ever operation against insider dealing, it has been confirmed.

The operation carried out jointly between the UK’s Financial Services Authority (FSA) and the Serious Organised Crime Agency (SOCA), has resulted in 17 addressed being searched and it highlights growing concern about the level of insider dealing.

Indeed, the FSA revealed that almost a third of company announcements are preceded by abnormal share activity. It believes that it has smashed ‘a sophisticated and long running insider dealing ring’ that it has been watching for years.

The FSA could still be months away from bringing charges against the seven men whom it suspects of passing inside information to traders either directly or via middlemen who then traded on this information to make profits. Insider dealing takes place when individuals trade on information that is not widely known in the market, for instance about takeover bids that are yet to be made pubic.

The investigation, which began in late 2007, is part of the regulator’s attempt to clean up the City of London by clamping down on insider trading and fraud. Documents and computers have been seized from residential and business premises.

Those involved include Martyn Dodgson, a managing director in the corporate broking department at Deutsche Bank who has been helping to advise the Treasury on its stakes in Royal Bank of Scotland and Lloyds.

Julian Rifat of hedge fund Moore Capital, a prominent New York based hedge fund with about $14 billion in assets under management, previously worked at several other hedge funds including VCM Fund Management and Brevan Howard Asset Management.

Others named are Graeme Shelley, a senior equity salesman at Novum Securities, a firm which specialises in providing discrete and professional sales to institutional and high net worth clients, Iraj Parvizi, a private trader, based in Dubai who originally comes from Iran, and Clive Roberts, head of equities at Exane BNP Paribas, a joint venture 50% owned by French bank BNP Paribas.

The move was seen by the City as an attempt by the FSA to show determination in eradicating insider dealing, which has been traditionally difficult to prosecute. The FSA said in its 2008-2009 annual report that it had found 29.3% of corporate announcements in 2008 were preceded by abnormal movements in the companies’ share prices, up from 28.7% in 2007 and 23.7% in 2005.

Earlier this month, Malcolm Calvert, a former partner at Cazenove was sentenced to 21 months in jail after being found guilty of insider trading.