Fresh data from the Financial Conduct Authority (FCA) suggests insider dealing could be occurring in as many as one in three takeover bids in the UK, though the overall trend shows signs of decline. The regulatory body identified suspicious trading patterns preceding 30.3 per cent of bids in 2023, marking a decrease from 35.3 per cent in 2022.
The FCA’s revised methodology indicates illegal trading has been more widespread than previously understood, owing to historical flaws in identification methods. The inclusion of suspicious share-buying activity on bid announcement days has elevated the detection rate from roughly 20 per cent to beyond 30 per cent of takeovers.
Previously overlooked trading activity on announcement days has now been recognised as significant, particularly given that this is when numerous advisers and company personnel are first brought inside the Chinese wall and made aware of impending bids. The regulator has acknowledged this oversight may have led to an underestimation of suspected insider dealing cases.
Suspicious trading volumes, an additional indicator monitored by the FCA, showed improvement with a reduction from 8.4 per cent to 5.6 per cent of bids. The regulatory body’s enforcement actions resulted in a notable conviction in February, when former Goldman Sachs analyst Mohammed Zina received a 22-month prison sentence for insider dealing and fraud offences.
The maximum penalty for insider dealing has increased from seven years’ imprisonment for pre-2021 offences to ten years for subsequent violations. The FCA maintains its enhanced methodology remains effective even during periods of market volatility, reinforcing its commitment to maintaining market integrity and transparent trading practices.
The regulator’s proactive stance includes direct communication with spreadbetting firms, emphasising the need for enhanced suspicious trade reporting. This renewed focus aims to strengthen market surveillance and deter potential insider trading activities in the UK’s financial markets.
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