Surge in Collins Stewart volumes raises City eyebrows

Shares in Collins Stewart, the stockbroker accused by its former employee James Middleweek of insider dealing and share ramping, traded at unusually high levels the day after Mr Middleweek released his damaging allegations to the Financial Services Authority.

The development will raise speculation that some corners of the City were familiar with the details of the confidential report by Mr Middleweek, which, since it became public, has dragged Collins Stewart's share price down by nearly a quarter.

Some 4.9 million Collins Stewart shares were traded on 16 July, more than three times the average volume in the stock. On the same day Mr Middleweek's lawyer officially informed Collins Stewart that his report had been delivered to the City watchdog.

The number of shares traded was even higher in the lead up to when the details of Mr Middleweek's dossier became public inThe Mail on Sunday on 24 August. On the Thursday before publication, 6.5 million shares changed hands and on the Friday nearly 2 million were traded.

It has already emerged that Jeremy Benjamin, a friend of Mr Middleweek who manages a hedge fund, sold short about 25,000 shares in Collins Stewart on that Friday.

Mr Middleweek was sacked by Collins Stewart on 9 July after the it accused him of trying to blackmail the company by offering to ditch his report in return for receiving £2.4m in compensation.

Collins Stewart, which said it was first contacted by The Mail on Sunday on the Friday before it printed details of the sensational row, refused to comment on the unusual share trading volumes. It alerted the police to Mr Middleweek's alleged blackmail attempt, but the Crown Prosecution Service said it would not pursue the case.

Mr Middleweek is believed to have made further disclosures to the FSA last week, including alerting it to the unusual trading volumes and also to the way Collins Stewart offered to settle the dispute with its former analyst. Collins Stewart has vehemently denied his allegations.