Six Sentenced for Insider Dealing

Jack Humphrey, Regulatory journalist
July 30, 2012 /

Six insider traders are now facing imprisonment after they have been found guilty of dealing illegally as alleged by UK’s Financial Services Authority.

In a case brought by the FSA and heard at Southwark Crown Court, Ali Mustafa, Pardip Saini, Paresh Shah, Neten Shah, Bijal Shah and Truptesh Patel have been sentenced for insider dealing contrary to section 52 of the Criminal Justice Act 1993.

Ali Mustafa, Pardip Saini and Paresh Shah were sentenced to 3 years 6 months. Neten Shah was sentenced to 18 months. Bijal Shah and Truptesh Patel were sentenced to 2 years.

The FSA said confiscation and costs orders will be dealt with later.

In passing sentence, Justice Pegden QC, noted: “The insider dealing in this case was not isolated criminal behaviour. The meticulous and exhaustive FSA inquiry has revealed exactly how your cheating was perpetrated.”

Tracey McDermott, acting director of Enforcement and Financial Crime Division, said: “This is another significant milestone in our fight against insider dealing. It demonstrates that we can successfully present the issues in a long and complex case so that a jury understands them and has the confidence to convict criminals involved in insider dealing rings.

“This lengthy and complex trial followed many thousands of hours of work by a dedicated team of investigators across our enforcement, markets and intelligence teams to unravel a sophisticated scheme which was designed to enable the defendants to profit from exploiting confidential price sensitive information.

“They thought that by attempting to cover their tracks they would get away with their criminal conduct. This investigation and these sentences should send a clear message to anyone else who might be tempted to do the same. Insider dealers are criminals, no more and no less, and we are committed to using all the tools at our disposal to bring them to justice.”

The offences were committed between 2006 and 2008, according to the FSA.

This was the longest and most complex prosecution brought by the FSA so far.

The case examined hundreds of trading accounts and telephone records, to build up a picture of the timing and degree of contact between those in the insider dealing ring.

The defendants obtained confidential and price-sensitive information from investment banks concerning proposed or forthcoming takeover bids. They then used a large number of accounts to place spread bets ahead of those announcements knowing that when the information became public knowledge the price would rise.

The defendants allegedly profited £732,044.59 from illegal deals between 1 May 2006 and 31 May 2008. It was a sophisticated and complex attempt to deal on inside information over a long period.

The six defendants were convicted of offences of disclosure of inside information and dealing whilst in possession of it in respect of six companies stocks:

Ali Mustafa was found guilty of disclosing confidential information of the stocks of Reuters and Vega; Pardip Saini, Paresh Shah, Bijal Shah and Truptesh Patel in respect of Reuters, Biffa, Premier Oil and Enodis, and Vega.

Additionally all except Truptesh Patel were found guilty in respect of Thus. Neten Shah was found guilty in respect of Vega and Thus.

 

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