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Case Studies

Insider dealing verdict

After a four and a half month trial at Southwark Crown Court, six men have been convicted of offences relating to insider dealing between 2006 and 2008, when they were arrested. They are Ali Mustafa, Pardip Saini, Paresh Shah, Neten Shah, Bijal Shah, and Truptesh Patel. The defendants will be sentenced on Friday, July 27. Mitesh Shah was acquitted of insider dealing.

 

 

This was the longest and most complex prosecution brought by the Financial Services Authority (FSA) to date.  The case involved examining many hundreds of trading accounts and telephone records, to build up a picture of the timing and degree of contact between those in the insider dealing ring.

 

The defendants obtained confidential and price-sensitive information from investment banks about proposed or forthcoming takeover bids.  They then used a large number of accounts to place spread bets ahead of those announcements knowing that when the information became public knowledge the price would rise.  The defendants were convicted of making a combined profit of £732,044.59 on trading between 1 May 2006 and 31 May 2008. According to the FSA it was a sophisticated and complex attempt to deal on inside information over a long period.  

 

Tracey McDermott, acting director of Enforcement and Financial Crime Division, said after the verdicts: “The defendants were involved in a long running, sophisticated and very profitable scheme. Indeed, several of the defendants derived the majority of their income from the scheme. They took a number of steps to reduce the likelihood of detection and continued, throughout the trial, to deny any wrongdoing. Our success in bringing these individuals to justice is the result of innovative and determined work done across our markets, intelligence and enforcement teams over several years.

 

“This sort of behaviour poses a significant risk to the integrity of markets and cheats honest investors.  We will continue to use all of the tools at our disposal to ensure those who seek to abuse the system have nowhere to hide. The conduct of the individuals in this case and the details of the scheme which have now been revealed are important reminders to firms of the need to protect inside information throughout its life so that it cannot be misused.”

 

The six defendants were convicted of offences of disclosure of inside information and dealing whilst in possession of it in respect of six companies stocks:

 

Ali Mustafa in respect of Reuters and Vega.  

 

Pardip Saini,  Paresh Shah, Bijal Shah and Truptesh  Patel in respect of Reuters, Biffa, Premier Oil  and Enodis, and Vega.  Additionally all except Truptesh Patel were found guilty in respect of Thus. Neten Shah was found guilty in respect of Vega and Thus.

 

Background

 

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. The FSA is due to be replaced by the Financial Conduct Authority and Prudential Regulation Authority in 2013. 


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