According to the Financial Services Authority, there were suspicious movements in stocks in 23.7% of bids in 2005, 28.7% in 2007 and 29.3% in 2008. It seems that some of that prescient activity might be about to be explained. This week the FSA and the UK Serious Organized Crime Agency swooped down and arrested seven men, with links to a major US hedge fund and a couple of leading European banks.
Tracking down insider dealers can be a long and painstaking business. According to Margaret Cole, the Director of Enforcement at the FSA, "There is rarely a smoking gun resting in the hand of the culprit." Generally, cases have to rely on circumstantial evidence, which can be extremely complicated. Juries that have eventually to weigh up that evidence can find it confusing.
In the absence of that system in the UK, the FSA is continuing to look for tools that might help its endeavours. This month it launched a consultation paper on the taping of mobile-phone calls. Although the organizations that come within the FSA's ambit are obliged to record phone conversations of staff, mobile phone conversations are currently exempt from the requirement.
The FSA now argues that with so many business calls being made on mobile phones, the distinction should be abolished and mobiles used for business purposes should also be recorded. The logic is inarguable but it does beg the question as to why any relatively intelligent insider dealer would be using a business phone of any sort to share information or act upon it. The FSA hopes that firms will "take all reasonable steps" to ensure business-related calls take place on phones provided by the employer, and thus taped.