On September 15, the UK Financial Conduct Authority (FCA) published a press release in which it announced that a group of persons found guilty of insider dealing in 2012 and 2013 have now been ordered to pay more than £3.2 million in confiscation orders.The confiscation orders were made between September 10 and 15 against Ali Mustafa, Paresh Shah, Neten Shah, Bijal Shah, Truptesh Patel and Richard Joseph. The £3.2 million ordered to be confiscated by the English courts far exceeds the profits generated directly from the insider dealing (which amounted to £732,044.59 (accrued by Mustafa, the Shahs and Patel) and £591,115 (Joseph)) and is the clearest indication to date that the English courts are now prepared to assume that persons found guilty of insider dealing must have profits from other illegal trading activity that took place within the same period.
Mustafa, the Shahs and Patel were all employed in the print room at JP Morgan Cazenove and were sentenced to jail terms totalling 16 years in July 2012 following the largest and most complex insider dealing investigation that the Financial Services Authority (FSA) (the FCA’s predecessor) had ever been involved in prosecuting. The defendants used information obtained from the print room to place spread bets on proposed or forthcoming takeover bids involving JP Morgan Cazenove’s clients. Joseph, an unemployed futures trader, was found guilty of six counts of conspiracy to deal as an insider and sentenced to four years’ imprisonment on each count (to be served concurrently) in March 2013. He had been supplied with inside information from Mustafa, who was a print room manager at JP Morgan Cazenove and who subsequently fled the country and remains on the run from police (it is believed he is in North Cyprus).
Tracey McDermott, director of Enforcement and Financial Crime at the FCA, said, “These individuals engaged in a sophisticated scheme to try and make easy money by exploiting inside information. As a result they have not only lost their liberty, their livelihoods and their reputations but they have also now been ordered to pay significant sums in confiscation. This should be a clear message to others that insider dealing does not pay.”
If the individuals do not pay the amounts ordered under the confiscation order they face further jail sentences in default of payment:
For many years the FSA was seen as a soft-touch for its failure to crack down on what many people considered to be flagrant abuses of the UK financial markets. However, the 2012 enforcement action against Mustafa, the Shahs and Patel was seen by many as too little, too late, as the FSA was broken up into the FCA and the Prudential Regulation Authority on April 1, 2013. As a new regulatory authority in the United Kingdom, the FCA has taken a hard and serious stance on insider dealing and is currently prosecuting eight more individuals for insider dealing with trial dates set for January 2016.