A major financial services investigation in Britain has led to the arrest of six men on suspicion of insider trading. In one of the biggest operations launched by the country's Financial Services Authority (FSA), a squad of 143 officers raided 16 residential and business addresses in the capital, London. Six men were arrested while documents and computers were seized from Deutsche Bank and Exane, part-owned by BNP Paribas, as well as the US hedge fund Moore Capital.
A trader at the London arm of the New York-based Moore Capital, along with employees of Deutsche and the investment bank Exane were among the people arrested by the FSA in an investigation that has sent shock waves through the City's financial district. A spokesman for Moore Capital, a US$14 billion (Dh51.42bn) hedge fund founded by the secretive US-born billionaire Louis Moore Bacon, said the firm was co-operating with the FSA.
So far, none of the six people arrested have been charged or formally identified by British authorities. And it is not clear whether the investigation will widen. "It is believed that the city professionals passed inside information to traders, either directly or via middlemen, who traded on this information and have made significant profits as a result," the FSA said. The move by the FSA comes a few months after the hedge fund world in the US was rocked by the Galleon insider trading case, in which almost two-dozen people were charged by American authorities.
"That's really in response to Galleon," said Darren Fox, a hedge-fund lawyer at Simmons and Simmons in London. Then one of the biggest hedge fund companies in the world, Galleon, founded by the Sri Lankan billionaire Raj Rajaratnam, closed down in October following the scandal. "Since that case broke, they [FSA] have been really keen to bring their own, and you see regulatory one-upmanship" said Mr Fox.
A Moore Capital spokesman said the investigation did not involve funds managed by the group. "Representatives of the FSA were at our London office to serve a search warrant for documents relating to an employee of Moore Europe working as an execution trader," Moore Capital said. "We understand from the FSA that the investigation of the employee does not involve any of the funds managed by Moore Capital."
In a separate case earlier this month a former trader was jailed following an FSA investigation, and last week it filed charges in another case against a former banker. In the latest investigation, the FSA worked with the Serious Organised Crime Agency in a "sting" operation dating back to 2007, according to the regulator. At Exane, a spokesman for the company said a person was being questioned in connection with the investigation while Deutsche Bank confirmed an employee was part of the inquiry.
* with Reuters and Bloomberg