The week of 24 November was a busy one for the FCA. On Wednesday, 26 November, two individuals were charged with insider dealing; one worked for an investment bank and was privy to information regarding a potential takeover. He leaked this information to the other individual, who then traded shares and spread bets on the basis of the privileged information. The case will now proceed to the Crown Court as a criminal proceeding.
Interestingly, the FCA disclosed that this activity was initially detected through the FCA’s own “specialist market monitoring systems,” with the investigation subsequently drawing in information from other sources, including “analysis of public records,” which suggested the two individuals “were former colleagues and flatmates.”
This case confirms that, once an investigation is opened, the FCA will look for as much information as possible, from as many sources as possible, including public records (and likely in this case, social media). This should serve as a lesson to firms’ surveillance functions: once an alert is raised, relevant information might lie in unusual places. It also serves as a warning to would-be insider dealers (or any rogue trader): you can run, but you can’t hide your digital footprint; regulators have access to the internet, and they’re not afraid to use it – undoubtedly, as well as numerous non-public sources.
The fact that the insider dealers traded in both the stock and CFDs is redolent of the 2022 case brought by the Dutch AFM and reminds us that regulators have access to data that individual firms’ surveillance teams can only dream about.
The following day, an individual was arrested “on suspicion of market manipulation, fraud by false representation, and forgery.” Few other details were provided by the FCA, indicating that this investigation is at an early stage. However, the fact that the press release mentions three aspects to the charges suggests a degree of complexity in the scheme. Further, the stated involvement of the Metropolitan Police suggests a criminal element, not just a regulatory breach solely within the FCA’s purview. Mention of a ‘search under warrant’ suggests a ‘dawn raid’ was carried out by the Met, before the suspect was interviewed under caution and later released on bail.
These cases should reinforce the notion that, whilst regulatory priorities may change from time to time in all jurisdictions, major regulators will continue to prosecute cases involving fraud and market abuse.
Read these FCA press releases for additional information:
Insider dealing: https://www.fca.org.uk/news/press-releases/fca-charges-two-individuals-insider-dealing
Manipulation, etc.: https://www.fca.org.uk/news/press-releases/arrest-made-suspected-market-manipulation-case