Financial watchdogs have been distracted by benchmark rate manipulation and have taken their eyes off more run-of-the-mill cases of insider dealing, lawyers have said.
Reacting to figures revealed by The Times on Friday showing that white-collar criminals had been acting with impunity, legal experts argued that the Financial Conduct Authority had sacrificed other investigations while focusing on Libor and Euribor prosecutions.
“The FCA’s focus on the manipulation of benchmark rates may have distracted it from the less headlining but no less serious other form of market manipulation — insider dealing,” Michael Potts, managing partner of Byrne and Partners, a leading London financial crime law firm, said.
“It is obvious to many in the market that such activities may continue to play a part in the movement of the price of securities, but the regulator knows that such investigations are usually time and resource-intensive, given that there are several component parts of an insider dealing offence to prove.”
A Times investigation found that the authority had prosecuted only eight cases of insider trading in the past five years and had secured a dozen convictions.
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Lawyers have pointed out that regulators lean towards launching prosecutions only in cases that they are convinced they will win.
“The FCA’s credible deterrence strategy of pursuing those suspected of insider dealing through the criminal courts has seen some success,” Neil Swift, a partner at Peters & Peters, a London law firm, said, “but the regulator tends to pursue only cases where the likelihood of conviction is high.”
Chris David, a specialist at the London office of Wilmer Hale, an American law firm, said there was anecdotal evidence that “insider dealing has always been rife” in the City of London, but that it had been difficult to investigate and prosecute. However, he said that “in recent years the FCA have been more aggressive in their approach to insider dealing and improved their market surveillance”.
Louise Hodges, a partner at Kingsley Napley, a London law firm, argued that increasingly cases might be going through the regulatory and professional conduct route rather than being brought for a full criminal prosecution.