Bloomberg News

U.K. Front-Running Suspects Face Final Interviews, Lawyer Says

June 29, 2011

(Updates with FSA comment in fourth paragraph.)

June 29 (Bloomberg) -- Seven people arrested by Britain’s financial regulator last year in its highest-profile insider- trading probe are being called in by the regulator for final interviews over the next three months.

Stephen Pollard, a lawyer for Moore Capital’s Julian Rifat, said the suspects have been scheduled for interviews with the regulator in July, August and September. The FSA is probing whether the men engaged in the front-running of block trades by using knowledge of upcoming securities sales, generally on behalf of a corporate client, to generate a profit for themselves.

The people, including employees from Deutsche Bank AG, Exane BNP Paribas and Moore Capital Management LLC, were put on extended bail until later this year as the Financial Services Authority continues to investigate the case. The regulator arrested the seven suspects in March of last year. Those questioned include: Rifat, Deutsche Bank’s Martyn Dodgson, Exane’s Clive Roberts, Novum Securities Ltd.’s Graeme Shelley and Iraj Parvizi, a director of Aria Capital Ltd.

The FSA, which prosecuted its first criminal insider- trading case in 2008, is “determined to take insider-dealing enforcement right into the heart of the city,” its acting head of enforcement, Tracey McDermott, said last month. The regulator is under pressure to secure a conviction that is comparable to U.S. prosecutors’ case against Galleon Group LLC co-founder Raj Rajaratnam.

‘Little Tavern’

The FSA in March 2010 conducted dawn raids in the case, codenamed Tabernula, Latin for “little tavern.” The arrests came after two years of surveillance with the Serious Organised Crime Agency, which typically targets criminal gangs and drug traffickers.

Front running is a practice in which a trader takes a position to capitalize on advance knowledge of a sale that is expected to influence the price of stocks or commodities.

Bankers typically alert select money managers to planned sales of securities before companies disclose them. The guidance they get from fund managers helps underwriters measure demand for the securities so they can better price them.

Under Section 118 of the U.K. Financial Services and Markets Act 2000, money managers are barred from trading on such information.

Chris Hamilton, a spokesman for the FSA, declined to comment.

Littlewood, Calvert Convictions

The regulator in February secured the longest-ever U.K. sentence for insider trading when former Dresdner Kleinwort banker Christian Littlewood was imprisoned for 40 months after admitting illegally trading over a 10-year period, along with his wife and an accomplice.

The FSA successfully tried Malcolm Calvert, an ex-partner at JPMorgan Chase & Co.’s Cazenove unit, last year in its first successful case against a finance professional for insider trading. It had previously convicted a former company lawyer, a brokerage intern and his father, a dentist, in two other cases.

--Editors: Christopher Scinta, Anthony Aarons

To contact the reporter on this story: Lindsay Fortado in London at lfortado@bloomberg.net.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.


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