Low-risk crime that reaps a high reward: Last year the Stock Exchange investigated 476 cases of suspected insider trading, but securing a conviction is difficult. Heather Connon reports

INSIDER dealing is often dismissed as a victimless crime. It may be difficult to identify the losers, but winners are easier to find.

They are the ones who have managed to make a substantial profit, or avoid a swingeing loss, by buying or selling shares ahead of an announcement likely to have a big impact on their price.

Anyone buying shares in Anglia Television before MAI announced its takeover, for example, would have seen the value of their shares soar 37 per cent on the day the bid was launched.

Any bit of gossip - about redundancies at a friend's firm or a new order for a partner's company - could qualify as inside information if it concerns a company quoted on the Stock Exchange and the news has not been officially announced.

Hearing the information is not illegal, dealing in shares on the strength of it - or encouraging someone else to do so - is.

That does not stop it happening, however. In 1993, the Stock Exchange investigated 476 cases where there may have been a breach of its rules, and referred 79 of them to other regulators - principally the Department of Trade and Industry. That is likely to be just the tip of the iceberg because insider dealers have to be adept at covering their tracks by, for example, dealing through nominee accounts, buying or selling in small parcels or using a number of different stockbrokers.

The rewards can be high. One of the largest cases involved a circle of four high-flying City dealers, who passed information between themselves, making profits of between pounds 1,200 and pounds 20,000 a time. They were caught out when they dealt in Rank Hovis McDougall shares ahead of a takeover bid and were fined up to pounds 10,000 each in 1992.

One of the most celebrated offenders was Geoffrey Collier, former head of securities at the merchant bank Morgan Grenfell, who was fined pounds 25,000 and given a 12-month suspended sentence when he bought shares before a bid - but lost pounds 10,000 in the process.

Those five were relatively unlucky, however. Even if the Stock Exchange manages to penetrate the smokescreen, the chances of conviction are not high.

Of the seven people charged with insider dealing in four cases last year, none was convicted. The previous year was slightly more successful, with four convictions from the six charged. The maximum penalties for those found guilty are seven years in prison, and unlimited fines.

The rules were tightened significantly in March, when the Criminal Justice Act extended the definition of who is an insider and extended the prohibition on dealing to government and other gilt-edged stocks. But, while the City is alarmed by the implications of the changes, there is no guarantee it will make convictions easier to come by.

Initial investigations are done by the Stock Exchange's market supervision department but it has no power to prosecute, passing the information to the DTI instead.

If the President of the Board of Trade believes there has been a breach of the Act, he can appoint inspectors to investigate.

As in the Archer case, these will invariably be an accountant and a lawyer who have wide powers to question witnesses and examine documents relating to the case. They will then produce a report, but it is up to the trade and industry ministers to decide what action to take.

Start your day with The Independent, sign up for daily news emails
News
people
News
A survey carried out by Sainsbury's Finance found 20% of new university students have never washed their own clothes, while 14% cannot even boil an egg
science...and the results are not as pointless as that sounds
News
politicsIs David Cameron trying to prove he's down with the kids?
News
Businessman at desk circa 1950s
news
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Tradewind Recruitment: Maths Teacher

Negotiable: Tradewind Recruitment: Tradewind are working with this secondary s...

Tradewind Recruitment: Science Teacher

Negotiable: Tradewind Recruitment: We are working with a school that needs a t...

Recruitment Genius: Recording Engineer

£20000 - £25000 per annum: Recruitment Genius: A long established media compan...

Tradewind Recruitment: Maths Teacher

Negotiable: Tradewind Recruitment: We are working with a school that needs a t...

Day In a Page

Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

Auschwitz liberation 70th anniversary

Woman sent to three Nazi death camps describes surviving gas chamber
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea