The series of financial malfeasance and the continuation of these events taking place time after time makes one wonder whether it is a coincidence that Wall Street is house to the world’s most rotten apples. Agreed that it isn’t Wall Street this time but the UK, the mentality is still the same: how to earn easy but dishonest bucks/pounds by taking advantage of the naïve investors and markets. Four men have been charged in a £3m ($4.83m) insider dealing conspiracy that has been uncovered lately. The charges span from the period of November 2006 to March 2010 when culprits named Martyn Dodgson, a senior manager at Deutsche Bank; Ben Anderson, a stock broker, Iraj Parvizi, an investor and an accountant by the name of Andrew Hind.
The awkwardly named Operation Tabernula is going to look into the allegations of insider trading carried out by the team and has planned to carry out a complex investigation to uncover the dealings. The basis of the allegations have their grounds in the fact that many of the people named held more than one positions in terms of working as a director for many of the companies while having investing interests as well. This is a simple method where a decision made at a board meeting can be used to make investment decisions before the announcement is made public and then earn the profit once the announcement is made and a risk less profit can be earned.
Like other financial crimes, forensic analysis will be carried out and even though it seems simple to notice, it does have a tendency to be difficult to prove as investors can use dummy accounts or cover any form of communication in order to hide it. The Financial Services Authority (FSA) is trying to identify an insider trading ring that allegedly made a profit of £22m ($35.40m). The likes of Deutsche Bank, Novum Securities, Exane BNP Paribas and hedge fund Moore Capital are under investigation. The trading was carried out in Scottish & Newcastle, National Express, Wolseley, Collins Stewart, Barclays and Paragon which are now being scrutinised.
By now it should be expected that these things would go on. The fact that the cut throat nature of brokerage, investment banking and mergers and acquisitions, it is tempting to make easy money by going against the unwritten code of ethics that exists in the industry. There seems to be a deficit due to no strict and stringent rules and regulations being in place. Plus, clearly there is an imbalance between the risk and return or the punishment seems to be low enough that people are willing to take the risk of circumventing the system. Will this be another wrap on the hands or would FSA take a strict enough action against the City traders? That still has to be seen and the investigation still has to be carried out. What can be said is that compared to its US counterpart, SEC, FSA should take the lead in this regard and have a harsher disposition not only to apply to this case but to be a lesson in future references as well.