Chris Blackhurst: Insider dealing is still rife in the City no matter how you count the numbers

Midweek View
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In 2008, the then chairman of HBOS, Lord Stevenson, told the bank’s shareholders: “There is a strong case for believing that the UK is exceptionally bad at dealing with white-collar crime. Only two weeks ago I was in New York and two people were convicted of insider dealing. We appear not to pursue things in the same way.”

There are those who will mock Lord Stevenson’s remark, coming as it did from the head of a bank that subsequently had to be rescued by the UK Government. But putting that on one side, there’s no doubt he had a point.

It’s been reinforced again with publication by the Financial Services Authority in its final annual report of data surrounding abnormal trading patterns ahead of takeover announcements (the FSA is now split between the Prudential Regulation Authority, Financial Conduct Authority and Bank of England). There’s a self-congratulatory air to the FSA finding. In 2003, more than 30 per cent of takeovers involving listed companies were preceded by some out-of-the-ordinary trades. In 2010, it was down to 21.2 per cent and in 2012 it fell again to 14.9 per cent.

“The fall took place in a year of weak takeover activity and against a backdrop of the FSA’s continuing focus on market abuse and enforcement activity in this area,” the FSA said.

Another way of looking at this is that someone is making a killing from insider information in one in seven mergers. Even though the number of such deals is down, that’s still a hell of a lot. And it is not reflected in the tally of successful prosecutions. There have been some, but nowhere near enough. One in seven does not smack of a regime that has insider dealing beaten.

Feelgood factor returns to the City

I’ve not seen my City pals so cheery for a long time. The weather helps, as do the victories of the British Lions, Andy Murray, and the England cricketers. But this feelgood factor goes deeper. There is a belief around that the next two years are going to see something like a return to pre-crisis activity.

My fund manager chum was especially optimistic. Companies are sitting on tonnes of cash, IPOs are heading London’s way, the economy is turning, and the eurozone has not collapsed. It’s all pointing one way, he said, literally rubbing his hands.

A new kind of growth at Goldman Sachs

Has a stubbly chin ever excited so much speculation? According to the Financial Times, “when [Lloyd] Blankfein’s beard materialised over Christmas it was seen as a symbol of a broader change of style at the bank”. Blimey, there was I, thinking that Mr Blankfein had just forgotten to shave when, apparently, it was a deliberate signal that the bank he runs, Goldman Sachs, was to shift direction.

This vignette is contained in a full-page report on Goldman ahead of the appearance in court of its former trader Fabrice Tourre. My favourite line? “In recent months Goldman has gone out of its way to counter criticism – that it mistreats clients, is disconnected from society and generally puts profits ahead of ethics…” Is that all?

To be fair to Goldman it is tackling it head on. Half of the bank’s 30,000 staff have been through a “reprogramming process”. I don’t want to be cynical and poke fun, I really don’t. Oh, go on then. That means half of the bank’s 30,000 staff have not. Right now it’s 50/50 if you get the good Goldman or bad Goldman. Of course, all 30,000 will be “reprogrammed” eventually. Don’t you just love the choice of language? What it suggests is that the nice, touchy-feely banker in front of you is actually a machine, a robot who does not believe in treating you well, being connected to society, and putting ethics ahead of profits.

Meanwhile, there is drama in the Blankfein household when wife Laura tells him she does not like his beard after all. What should he do? To shave or not to shave? Aaaagh, the perils of high office.