In a prosecution brought by the Financial Services Authority (FSA) three people have pleaded guilty to insider dealing. James Sanders a director of Blue Index, a specialist Contract for Difference (CFD) brokerage, had previously pleaded guilty to a total of 10 charges of insider dealing, his wife Miranda Sanders pleaded guilty to 5 charges of insider dealing, and James Swallow, a co-director of Blue Index, pleaded guilty to 3 charges of insider dealing at an earlier hearing. The defendants will be sentenced on 19 June 2012.
Christopher Hossain, a former senior trader at Blue Index and Adam Buck, a former employee of Blue Index, were today acquitted of insider dealing at a trial heard at Southwark Crown Court
Arnold McClellan, a senior partner in a large US accounting firm was ‘insider’ to a number of mergers and acquisitions in US securities listed on the NYSE and NASDAQ exchanges. The prosecution case was that inside information was leaked by Arnold McClellan, Miranda Sanders’ brother in law, or her sister Annabel McClellan, and passed to James and Miranda Sanders who used the information to commit insider dealing in those US securities between October 2006 and February 2008. James Sanders also disclosed information to others including James Swallow, who used that information to commit insider dealing. In addition, James Sanders encouraged clients of Blue Index to trade in CFDs on the basis of that inside information. The total profits generated by the defendants were approximately £1.9 million, while the total profits generated by the clients of Blue Index were approximately £10.2 million.
This case is significant as it involved a parallel investigation by the US Securities and Exchange Commission (SEC) and US Department of Justice (DoJ), together with the Federal Bureau of Investigation (FBI). As a result of action taken by the SEC, Annabel McClellan reached a settlement which included the payment of a $1 million fine. Mrs McClellan also pleaded guilty to a charge brought by the DoJ and is currently serving an 11 month prison sentence without parole.
Tracey McDermott, acting director of enforcement and financial crime division, said:
“James and Miranda Sanders orchestrated a long running, sophisticated and very profitable scheme. They no doubt thought that using information about US deals would make it more difficult for us to pursue. They did not count on the increasingly effective cross-border cooperation in these types of cases. We, and our overseas counterparts, are committed to working together to tackle abuse wherever it occurs.
“Sanders and Swallow abused their position as approved persons. They used Blue Index, an authorised firm, as a vehicle for their criminal conduct and cynically exploited the inside information they had illegally obtained to try and improve its reputation and profitability for their own benefit. This case should send a clear message about our willingness, and ability, to tackle serious, organised insider dealing”
Background
- The FSA has so far secured 11 further convictions in relation to insider dealing: Christopher McQuoid and James William Melbourne in March 2009; Matthew and Neel Uberoi in November 2009, Malcolm Calvert on 11 March 2010, Anjam Ahmad on 22 June 2010, Neil Rollins on 21 January 2011, Christian Littlewood and Angie Littlewood on 8 October 2010 and Helmy Omar Sa'aid on 10 January 2011 and Rupinder Sidhu on 15 December. Details of each case are available on the FSA website.
2. The FSA is currently prosecuting 11 other individuals for insider dealing:
Name Trial date
Bijal Shah Trial commenced 27 February 2012
Truptesh Patel Trial commenced 27 February 2012
Paresh Shah Trial commenced 27 February 2012
Mitesh Shah Trial commenced 27 February 2012
Neten Shah Trial commenced 27 February 2012
Ali Mustafa Trial commenced 27 February 2012
Pardip Saini Trial commenced 27 February 2012
Thomas Ammann Trial date to be confirmed
Christina Weckwerth Trial date to be confirmed
Jessica Mang Trial date to be confirmed
Richard Joseph Trial date to be confirmed
3. The Financial Services and Markets Act 2000 gives the FSA powers to investigate and prosecute insider dealing, defined by The Criminal Justice Act 1993.
4. Individuals with information about market abuse can call the FSA’s market abuse hotline on 020 7066 4900.
5. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; securing the appropriate degree of protection for consumers; fighting financial crime; and contributing to the protection and enhancement of the stability of the UK financial system.
6. The FSA will be replaced by the Financial Conduct Authority and Prudential Regulation Authority in 2013. The Financial Services Bill currently undergoing parliamentary scrutiny is expected to receive Royal Assent by the end of 2012.
