Three Sentenced for Insider Dealing
The UK’s Financial Services Authority has warned those who might be tempted to deceive investors through insider trading of its “continued commitment to use all of the tools at our disposal to tackle those who abuse the market” as three insider dealing suspects were convicted.
James Sanders, a director of Blue Index, a specialist Contract for Difference (CFD) brokerage, his wife Miranda Sanders and James Swallow, a co-director of Blue Index, have today been sentenced for insider dealing contrary to section 52 of the Criminal Justice Act 1993.
James Sanders was sentenced to four years in custody and disqualified as a director for five years; Miranda Sanders was sentenced to 10 months in custody; and James Swallow was sentenced to 10 months in custody. Confiscation and costs orders will be dealt with at a later date.
In passing sentence His Honour, Mr Justice Simon QC, noted tha these weret:
“Deliberate and calculated acts of dishonesty” and that as directors of an FSA authorised company Sanders and Swallow were responsible for ensuring that “Blue Index complied with its obligations to act honestly and competently. In addition James Sanders was head of compliance with additional obligation of ensuring that there was no insider dealing. He failed in that duty.”
Tracey McDermott, acting director of enforcement and financial crime division, said: “This was a case of systematic abuse by approved people of their privileged position in the market – we are determined to stamp out such abuse. Our tough, coordinated approach to insider dealing and our commitment to taking on difficult criminal prosecutions has really begun to pay off.
“These three individuals funded very comfortable lifestyles by cheating the system and other honest investors. No doubt as they prepare to spend their first night behind bars they will be reflecting on the consequences of their greed.”
James Sanders had previously pleaded guilty to a total of 10 charges of insider dealing, Miranda Sanders pleaded guilty to 5 charges of insider dealing, and James Swallow, pleaded guilty to 3 charges of insider dealing.
Arnold McClellan, a senior partner in a large US accounting firm was an ‘insider’ to a number of mergers and acquisitions in US securities listed on the NYSE and NASDAQ exchanges. The prosecution case was that inside information was leaked by Arnold McClellan, Miranda Sanders’ brother in law, or her sister Annabel McClellan, and passed to James and Miranda Sanders who used the information to commit insider dealing in those US securities between October 2006 and February 2008.
James Sanders also disclosed information to others including James Swallow, who used that information to commit insider dealing. In addition, James Sanders encouraged clients of Blue Index to trade in CFDs on the basis of that inside information. The total profits generated by the defendants were approximately £1.9 million, while the total profits generated by the clients of Blue Index were approximately £10.2 million.
This case is significant as it involved a parallel investigation by the US Securities and Exchange Commission (SEC) and US Department of Justice (DoJ), together with the Federal Bureau of Investigation (FBI). As a result of action taken by the SEC, Annabel McClellan reached a settlement which included the payment of a $1 million fine. Mrs McClellan also pleaded guilty to a charge brought by the DoJ and is currently serving an 11 month prison sentence without parole.
The arrests and searches were made with the assistance of officers from the City of London Police (CoLP). The FSA are undertaking confiscation proceedings to recover the benefit of their criminality.
The FSA has so far secured 11 further convictions in relation to insider dealing: Christopher McQuoid and James William Melbourne in March 2009; Matthew and Neel Uberoi in November 2009, Malcolm Calvert on 11 March 2010, Anjam Ahmad on 22 June 2010, Neil Rollins on 21 January 2011, Christian Littlewood and Angie Littlewood on 8 October 2010 and Helmy Omar Sa’aid on 10 January 2011 and Rupinder Sidhu on 15 December.