Seven inside traders appear in UK court as high profile cases highlight watchdog crackdown on rogue investors

News - Banking

Written by Ray Clancy

Friday, 16 April 2010 12:15

Seven men charged with running an insider trading ring with information gleaned from the London printers of Swiss bank UBS and UK brokerage Cazenove have appeared in court for the first time.

Mitesh Shah, Neten Shah, Paresh Shah, Bijal Shah, Truptesh Patel, Ali Mustafa and Pardip Saini are alleged to have used confidential information to trade in 12 UK listed firms over two years, including media group Reuters during its 2007 takeover by Thomson Corporation of Canada.

It is the largest insider dealing case to be brought before court by the Financial Services Authority (FSA), which is attempting to crack down on market abuse and has grabbed the headlines over the last month with high profile arrests.

The men, aged between 29 and 47 years old, spoke only to give their names, addresses and dates of birth before the case was referred to a higher Crown court for a preliminary hearing on April 22. Apart from 29 year old Mustafa, who was dressed in a leather jacket and walked with a swagger, the men were soberly dressed and impassive.

The FSA, which is seeking the extradition of an eighth suspect linked to the so-called printer ring, last month charged the men with 13 counts of insider dealing it alleges netted them £2.5 million. Mitesh Shah was also charged with spread betting to launder proceeds.

The defendants, who face up to seven years in jail if found guilty, have been granted bail. Under the bail conditions, they have surrendered their passports and need to notify the FSA 48 hours before any plans to change address.

The FSA, whose enforcement wing has more than doubled to 450 staff since 2005 after hiring more criminal lawyers and specialist staff, is on a quest to silence critics who accuse it of failing to prosecute senior employees at top institutions.

The regulator has brought three successful criminal cases to date, including a case against Malcolm Calvert, a former partner at Cazenove, who was jailed for 21 months last month in its most high profile victory to date.

That conviction was closely followed in March by the dramatic arrests of seven insider dealing suspects, including a managing director at Deutsche Bank, the head of sales trading at Exane, part owned by France's BNP Paribas and a trader at hedge fund Moore Capital.

Although the FSA’s most recent figures show unusual share price movements in around 29 percent of takeover announcements, insider dealing cases remain notoriously lengthy, painstaking and tough to nail.

In the Calvert case, the prison sentence fell well short of the seven year maximum term for insider dealing and two accomplices walked free. The FSA was unable to identify Calvert’s primary insider and source of share tips while the other accomplice, Bertie Hatcher, a friend who bought stock shortly before takeovers were announced, turned informant in return for a fine.