Concerns Over Insider Dealing As Reports Of Suspicious Transactions Rocket

08 Nov 2013 | 10:54 am | 1 min. read

250% increase in suspicious transaction reporting over past five years

The number of suspicious transactions reported to the financial services watchdog has rocketed by 250% over the past five years, according to international law firm Pinsent Masons.

Data obtained from the Financial Conduct Authority by Pinsent Masons shows that the number of suspicious transaction reports – often associated with suspected insider dealing – has increased from 339 in 2008/9 to 1199 in 2012/13. On average 100 suspicious transactions are now reported per month compared to 28 per month five years ago.

'Misuse of information' is the most frequently reported abuse and has seen a 300% increase over the same period, while reports of 'distortion and manipulation' have almost doubled.

A suspicious transaction is one in which there are reasonable grounds to suspect it might constitute market abuse, such as insider dealing or market manipulation. It has been a requirement of the Market Abuse Directive (MAD) since 2005 that firms seeing suspicious transactions must report these to the FSA/FCA so that it can review these and other similar transactions for evidence of market abuse. 

Monica Gogna, a Partner in the Financial Regulation team at Pinsent Masons says:

"The FCA’s market monitoring division, led by Lord Spens, has stepped up the pressure on regulated firms to share information about both ordinary trades and those that look suspicious. Under UK law, banks and brokers must report every single transaction in a regulated security to the FCA every day. Pressure on regulated firms to report suspicious transactions has also been stepped up and these latest figures show that the regulator's efforts to deter wrongdoing are starting to bear fruit. No doubt the threat of multi million pound fines is putting pressure on regulated firms to 'get their house in order' as fines and revelations such as these undermine trust and confidence in UK financial markets.

"City enforcers have homed in on market abuse by financial services professionals and have made it quite clear that non compliance and criminal behaviour won't be tolerated. The casual sharing of confidential information that was once rife in London is now riskier than ever before. The regulators new focus on enforcement and personal accountability has made people think twice about turning a blind eye to suspicious transactions, the fear of fines, criminal prosecutions and bans now runs deep."

The FCA's focus on market abuse and insider dealing remains a key priority for the City regulator which has secured 23 convictions since 2009 with seven people currently awaiting trial and 13 convictions (including five guilty pleas) last year.* Insider dealing is a criminal offence that is punishable by a fine or up to 7 years imprisonment.

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