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UK’s FCA Defends Its Expensive Insider Trading Probe

Financial Conduct AuthorityThe Financial Conduct Authority (FCA), the security regulator in the U.K has defended its expensive long-running probe into insider trading investigations on the basis of its conviction record. Two senior finance professionals were convicted earlier this week of insider trading charges after an eight-year- long investigation but three others were acquitted. The latest trial result has give the FCA five convictions out of eight prosecuted in the case.

Records reveal that the regulator spent close to 14 million pounds on the trial which lasted four months as well as on the investigation which took eight years. The recent convictions will give the FCA a much needed boost and will strengthen its reputation of fighting insider trading.

In a statement, Guy Wilkes, an attorney at Mayer Brown who worked with the FCA earlier said,

Five out of eight convictions is a good result. The mixed verdict demonstrates the difficulty of bringing prosecutions in this area. The FCA can’t let acquittals put them off pursuing these cases or it would be open season for insider traders.

Mark Steward, the FCA Head of Enforcement had earlier stated that since the burden of proof was very high in such insider trading cases, it increased the chances of not getting a conviction and should not directly be linked into the performance of the FCA.

The FCA’s investigation into insider trading was called ‘Operation Tabernula’ and has so far netted five convictions, three of them last year after Julian Rifat ex-Moore Capital Management trader, Graeme Shelley former trader at Novum Securities Ltd and Paul Milsom, an erstwhile trader at Legal & General Group pleaded guilty to insider trading charges.

In the latest trial, the jury convicted Martyn Dodgson former Deutsche Bank AG managing director and accountant Andrew Hind while acquitting broker Andrew Harrison and day traders Iraj Parvizi and Benjamin Anderson.

According to records, the FCA spent 4.5 million pounds on temporary personnel to study and analyze documentary evidence, while 2.25 million pounds was spent as compensation for outside counsel. The FCA had assigned a permanent full-time staff of up to 12 people to work on the investigation and at times expanded its team size which went up to 40 personnel at times.

The FCA uses fines levied in convictions to recover its expenses. The organization has so far secured 30 convictions over the past few years. The FCA has had more prosecutorial success than its fellow regulator, the U.K. Serious Fraud Office which has lost anumber of high-profile cases.


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