FSA targets brokers for insider cases
THE FSA has written to 190 brokers demanding explanations for why they have failed to flag up enough “suspicious trades” to the City watchdog and warning they could face visits from enforcement officers as a result.
The letters, sent in April, are part of a wider FSA crackdown targeting not just those leaking and trading on inside information, but even those executing the trades.
The watchdog selected the firms on the basis that of the millions of trades they have recorded carrying out, they have sent in few or no “suspicious trading reports” (STR) flagging up notable activity like trades carried out just before price-sensitive announcements by a company.
The firms receiving the letters are mostly large brokers with institutional clients or funds like investment banks and asset managers. Although the letters are not aimed at “fishing” for enforcement cases, they could result in enforcement officers visiting a firm and forcing brokers to retrain their staff and offer up more information such as a “near-missed log” of unusual trades.
The move is a significant escalation of the FSA’s war on insider trading and follows on from the David Einhorn/Punch Taverns case, in which the FSA fined Caspar Agnew, a JP Morgan trader who executed a share sale for Einhorn, because he did not flag the trade as suspicious after Punch unveiled a rights issue.
Ruth Gevers, a director at Promontory and former FSA officer said the FSA’s aggression means “people who want to comply with the regime worry about how they can be sure they will always comply.”