It's the £30bn industry that has prospered like no other during the recession – but nobody champions its success. Those working in it operate across all sectors, from public to private, with little regard for the consequences of their actions. They might work near you in the office or they might be the bloke you say hello to down the pub. You might be sitting next to one now.
They are Britain's fraudsters: difficult to detect, almost impossible to put behind bars. But last week the big crackdown that has long been promised by the UK's authorities began.
Dawn raids by the Financial Services Authority (FSA) and the Serious Organised Crime Agency (Soca) saw seven arrests in the Square Mile, with employees from some of the City's most august firms, including Deutsche Bank and BNP Paribas, as well as hedge fund Moore Capital, being collared. The arrests for insider trading were the culmination of an investigation that started in 2007. In one swoop, on Tuesday morning, the FSA gathered together 143 staff and, with officers from Soca, raided the homes of the suspects – arresting one at an airport – and took them for questioning. Most of the alleged suspects are now on bail or waiting to be released.
A few weeks ago, after a four-year investigation by the FSA, Malcolm Calvert, a former partner at Cazenove, that most blue-blooded of banks, was sentenced to nearly two years in jail for his part in an insider-trading scam that netted him more than £100,000.
Across from the City, London's Serious Fraud Office (SFO), much maligned for some high-profile failures in the past, scored its own successes.
Last week the agency launched one of its biggest operations in years – more than 100 SFO officials and 40 police were involved – with the arrest of three directors of Alstom, the engineering company, for price-fixing.
And two weeks ago, the SFO struck a notable blow when it forced Innospec Limited, a British subsidiary of an American chemicals firm, to pay more than $12m (£8m) in fines after it admitted paying bribes to win deals.
But it's the launch of the most high-profile City insider-dealing raid in years that has really captured the imagination. "There has always been a belief among people who work and police the City that insider trading remains rife," says Tim Harvey, a former City of London fraud investigator and now director of UK operations at the Association of Certified Fraud Examiners (ACFE). "But it is so difficult to get successful convictions for insider dealing. Indeed, with increased sophistication, I think it's probably more difficult than it has ever been." He adds: "Given the huge splash the FSA and Soca have made with these arrests, using so many officers, I really hope they get a result – because, if they don't, it'll set investigations in this area back many years."
Insider dealing became a criminal offence only in 1980, a year after Baroness Thatcher came to power.
The wave of privatisations and new levels of share ownership that she forced through in the following years necessitated a cleaning up of the trading system, where dealing on the inside was endemic.
Assessments of the extent of insider dealing since have been few and far between, although a paper from the FSA in 2006 did seek to "measure market cleanliness". It estimated that between 24 to 32 per cent of takeover bids in the UK during the early part of the Noughties involved insider dealing to significantly move the target's share price.
The laws governing insider dealing have been refined a number of times since 1980, most recently taking into account a 2003 EU directive.
But despite the deterrent – insider dealing carries a maximum sentence of seven years – the number of successful prosecutions remains low.
According to data compiled by Professor Paul Barnes from Nottingham Trent University, there have been just 22 successful criminal cases for insider dealing. Only two so-called "rings of City professionals" have been unearthed and received criminal sanction since 1980.
Since 2000, the FSA has also brought 15 successful civil actions for market abuse – 10 of which directly relate to insider dealing.
Barnes says: "If last week's arrests of a so-called 'insider-trading ring' across firms proves to be successful, then it will be quite remarkable. This is a biggie. The rings that have been caught in the past were quite small."
According to Barnes, the largest incident of a ring being caught was in 2003 with the case of Spearman, Smith and Payne. This involved a proofreader at a firm of commercial printers, who used his access to draft prospectuses and offer documents to profit from price changes in 27 takeovers and merger deals. The ring netted the perpetrators more than £300,000 although none actually worked in the Square Mile.
"Although I wasn't allowed to listen to the evidence directly, I gather that the case made extensive use of phone taps, something that has probably played a part in these latest arrests," says Barnes.
Alongside phone taps, the authorities now have a much larger arsenal of weapons to deploy and a much more sophisticated system by which to track suspicious movements in share prices, which often acts as the catalyst for investigations.
A few years ago, the FSA installed Sabre, a powerful – and expensive – computer system which analyses suspicious trading patterns in stocks.
The regulator is also making greater use of whistleblowers, who, under new legislation, are granted immunity from prosecution if they testify against ringleaders guilty of crimes.
Praise has also been heaped on Margaret Cole, head of enforcement and crime at the FSA, for her determination to carry out the crackdown. One report described her as "an Eliot Ness for the 21st-century City of London".
The Cambridge-educated Cole – who completed her A-Levels two years earlier than normal – has an enviable CV, having played influential roles as a lawyer in the collapse of BCCI and having acted for pensioners looking for recompense from Robert Maxwell.
"Margaret Cole has been very vocal in promising to go after people, and she is undeniably good," says the ACFE's Harvey. "But I think Philip Robinson [a former director of financial crime at the FSA] should take some of the plaudits, too."
If reports are to be believed, a wave of further arrests are planned this week, with as many as 11 people likely to be charged over an insider-trading scam hatched at a printers in north London. Project Saturn, the moniker given to the raids, is certainly likely to further enhance the reputation of Cole and her colleagues at the FSA.
It seems that the great City crackdown has only just begun.
Seven arrested in dawn raids
In dawn raids last Tuesday, 143 FSA officers raided 16 premises in London and the South-east, and arrested seven financiers. Deutsche Bank, Exane BNP Paribas and Moore Capital hedge fund which manages $15bn, were targeted. Sources confirmed that Martyn Dodgson, a managing director in Deutsche's corporate broking unit, BNP's head of European sales trading and Moore trader Julian Rifat were among those arrested.