Collins Stewart in the clear over insider dealing claims

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The Independent Online

The Financial Times' defence against a libel action from Collins Stewart Tullett (CST), the stockbroker, was dealt another damaging blow yesterday, as the Financial Services Authority said it would not be taking any disciplinary action against CST in relation to the reported allegations of insider dealing.

The Financial Times' defence against a libel action from Collins Stewart Tullett (CST), the stockbroker, was dealt another damaging blow yesterday, as the Financial Services Authority said it would not be taking any disciplinary action against CST in relation to the reported allegations of insider dealing.

In a statement issued yesterday morning, the FSA said it had conducted an enforcement investigation into a number of allegations against CST - brought by its former employee James Middleweek last summer - and had now decided to close the investigation without taking any disciplinary action.

The statement may not amount to complete vindication for CST, however. In a footnote, the FSA added that it may have issued a private warning to the firm if it felt it had stumbled on matters "of concern". However, a spokesman said that given that no official disciplinary action had been taken, the conclusions of its investigations, and any consequent warnings would remain confidential. CST would not comment on the FSA's conclusions.

CST is suing the FT for libel, arguing its coverage of the Middleweek scandal was "thoroughly irresponsible journalism", which it believes was directly responsible for the millions of pounds that were wiped off the stockbroker's share price when the story broke. Following theannouncement by the FSA, the FT's defence is now left resting on whether the courts believe the FT's primary source - a document annexed to Mr Middleweek's High Court writ against CST for unfair dismissal - was subject to legal privilege.

In a statement yesterday, Andrew Gowers, the FT's editor, said: "The fact that the FSA has written to Collins Stewart indicating that its investigation has now closed makes no difference to the merits of the FT's defence to Collins Stewart's libel action.

"The FT has never passed judgement on the truth or otherwise of the allegations made by James Middleweek concerning Collins Stewart. Those allegations were contained in a document which was annexed to Mr Middleweek's claim form in his legal action against Collins Stewart.

"It is the FT's contention that this was a public document and that the article which is the subject of Collins Stewart's libel action fairly and accurately reflected its contents. The article reported that it believed it was being subjected to a blackmail attempt by Mr Middleweek."

A spokeswoman for the FT added that the paper had no intention of seeking a pre-court settlement in the light of the announcement. She added that the paper had applied to strike out part of CST's damages claim, which was being made for the loss in CST's market value as a result of the story. This amounts to about £128m of CST's total damages claim of £230.5m.

In his own statement yesterday, Terry Smith, the chief executive of CST, said: "Our view was always that the allegations were spurious and made by an individual whose credibility and motivation were at least highly questionable. Now they can be seen in that light. We look forward to seeing Mr Middleweek and others in court."

The statement added that in addition to CST's legal actions against the FT and Mr Middleweek, the group was also pursuing Mr Middleweek's lawyer, Dale Langley. It said that an associate of Mr Middleweek, Jeremy Benjamin, had already admitted defaming the company and was currently in talks with the group over a settlement.

Mr Middleweek's case is due to be heard in the High Court next year. He has now moved to Australia.

Shares in Pearson, the FT's parent group, fell 2.2 per cent on the news, but recovered to close up 0.5p at 613.5p. CST shares rose 5.6 per cent to 366p.

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