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New financial watchdog's chief urges tougher insider trading sentences

The chief executive of Britain's new financial watchdog wants tougher sentences for white-collar criminals, to persuade more to turn "state's evidence" and shop miscreant colleagues to avoid jail themselves.

Martin Wheatley, head of the Financial Conduct Authority, made the call after MPs on the Parliamentary Inquiry into Banking Standards complained that Britain still has a poor record on convictions when compared to other countries.

Mr Wheatley said the US has two big advantages compared to Britain: American enforcers can use phone taps, and US courts typically impose higher sentences.

"Very often because of higher tariffs somebody would turn state's witness. If the tariff was higher we would have more people coming forward to co- operate with us. That level of co- operation would secure more convictions," he told MPs. "It [insider trading] is a difficult crime to prosecute, but we have sent 20 people to jail and we are taking on complex and difficult cases."

Mr Wheatley said the use of phone taps in Britain, which could prove controversial, was a wider issue than could be dealt with by the FCA.

It is not within the inquiry's remit but it could recommend tougher sentences for those convicted of insider trading and other City crimes when it makes recommendations for a forthcoming banking Bill.

The US has been running a successful four-year crackdown on insider trading which has seen 70 people brought to book.

Rajat Gupta, the former Goldman Sachs director and McKinsey managing director, was on Wednesday jailed for two years and fined $5m (£3m) after being caught up in the wide-ranging US insider probe. But that was less than prosecutors had hoped for.

Gupta was convicted in June of tipping off Raj Rajaratnam, the hedge fund tycoon, with corporate secrets.

Mr Wheatley insisted that whistle- blowers in Britain were protected when they approach regulators.