Insider dealers pay the price for print room dealing
Market reCap November 2014 edition
- UK Corporate Governance Code update: emphasis on longer term sustainability
- Sponsor competence, joint sponsors and sponsor conflicts
- Takeover Code: consultation on post-offer undertakings and intention statements
- Insider dealers pay the price for print room dealing
- QCA Audit Committee Guide for Small and Mid-Size Quoted Companies
The Financial Conduct Authority (FCA) has obtained confiscation orders amounting to nearly two and a half times the profit made by a number of convicted insider dealers from the trades which led to their convictions.
The confiscation orders were issued after seven individuals were sentenced to between four years and 18 months imprisonment for insider dealing under section 52 of the Criminal Justice Act 1993 in July 2012 and March 2013. The cases involved the disclosing of confidential information obtained by several of the individuals working in the print rooms of UBS and JP Morgan Cazenove (no allegations were made against their employers). The information was used to place spread bets before the release of announcements relating to potential takeover bids for several companies (i.e. before the share price in those companies rose).
From these trades, the various individuals made a combined profit of just over £1.3 million. In September 2014, the FCA obtained confiscations orders against them worth a total in excess of £3.2 million.
The total amount confiscated far exceeds the profits generated by the specified trades: for example, Richard Joseph was ordered to pay over £2 million whereas his net profit from these deals was less than £600,000. This was the result of the confiscation regime under the Proceeds of Crime Act 2002, under which the court can, in appropriate cases, assume that the profits from other trading that took place within the same period represented the proceeds of crime. In these cases, it is up to the individual to prove that other profits should not be taken into account in making the confiscation order.
In the words of Tracey McDermott, the FCA's director of enforcement and financial crime, this case "should be a clear message to others that insider dealing does not pay".
Owain Davies is a Solicitor in Fieldfisher's Corporate Group in London