In January 2013 Damian Frank Clarke ("Mr Clarke") a former equities trader at Schroders Investment Management Limited ("Schroders") was arrested along with four other family members and charged with nine counts of insider dealing contrary to S52(1) of the Criminal Justice Act 1993 ("CJA"). S52(1) of the CJA provides that an insider who has information as an insider is guilty of insider dealing if, in certain circumstances, he deals in securities that are price affected in relation to the information.
Subsequently, the FCA discontinued its investigation against the other four individuals who had been arrested. However, it continued with its prosecution against Mr Clarke in relation to nine counts, which offences related to trading in shares and spread bets over a nine year period between 30 October 2003 and 28 November 2012.
Mr Clarke pleaded guilty at Southwark Crown Court to seven of the nine counts of insider dealing on 24 July 2015 and in March 2016, prior to the trial, he pleaded guilty to the remaining two counts. Mr Clarke admitted dealing on the basis of inside information obtained during the course of his employment with Schroders in a variety of roles. He was employed initially as a fund manager's assistant and from 2006 as an equities trader at Schroders. Mr Clarke is no longer employed by Schroders and Schroders has not been subjected to any investigation in relation to Mr Clarke's activities.
In his roles within Schroders, Mr Clarke received inside information about significant corporate events, for example anticipated public announcements of mergers and acquisitions which he used to place trades in his own name and that of close family members whom he impersonated. His deception led to the arrest of the four members of his family but the FCA's investigation against them was subsequently discontinued.
The most high profile trades made by Mr Clarke came a day before Autonomy's $11.7bn sale to Hewlett Packard in August 2911 and ahead of Invensys's surprise GBP1.7bn sale of its rail division to Siemens. The total profits Mr Clarke is reported to have made from his trades is at least GBP155,161.98.
Mr Clarke was sentenced on 13 June 2016 to two years' imprisonment. In sentencing, the Judge, Her Honour Judge Korner remarked "It was no exaggeration when prosecution Counsel said in opening that these offences were pre meditated, deliberate and dishonest."
Confiscation proceedings are reported now to be being pursued against Mr Clarke.
Mark Seward the Enforcement Director of the FCA stated "Insider dealing is a dishonest crime, not a means for city professionals to make money on the side. Mr Clarke abused the trust that came with a city career by cheating the system and, in doing so, he let down the expectations of the whole community."
Following the financial crisis in 2008, the FCA (previously the FSA) has secured over 20 convictions of insider dealing. The crime of insider dealing carries a maximum sentence of seven years and the efficacy of the two year prison sentence has been questioned. Many consider that a two year sentence will not act as a sufficient deterrent and consider there is a need for clearer sentencing guidelines. That said, the former Deutsche Bank AG corporate broker, Martyn Dodgson was sentenced to prison in May 2016 for 4 1/2 years for a gross breach of trust resulting from his insider dealings.
