The Financial Conduct Authority (FCA) has prosecuted only eight cases of insider trading in the past five years. By contrast, more than 10,000 were successfully sanctioned for benefits offences in the last year alone by the Department for Work and Pensions (DWP).
Research carried out by The Times newspaper suggests that these statistics are by no means reflective of the true state of the industry.
The Times reports that over the last two years share prices fell on the day before a major profit warning in 67% of cases. In the same period, share prices increased on the day before a major takeover announcement in 70% of cases. FCA statistics indicate ‘abnormal’ share price movements occurring in the two days before the announcement of 18% of takeovers in the last year.
These statistics have been interpreted in some quarters to suggest traders are acting on prior notice.
Mark Dampier, Research Director of investment broker Hargreaves Lansdown, offered the following analysis:
‘Given the scale of regulation nowadays these figures are really surprising and suggest insider dealing is still a major problem… getting evidence to launch a prosecution is not easy but you have to wonder whether the regulator has been distracted since the financial crisis.’
The FCA is likely to increase its focus on such activity following these findings.