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
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
footballShirt then goes on sale on Gumtree
Terry Sue-Patt as Benny in the BBC children’s soap ‘Grange Hill’
voicesGrace Dent on Grange Hill and Terry Sue-Patt
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
Have you tried new the Independent Digital Edition apps?
ebookA unique anthology of reporting and analysis of a crucial period of history
A poster by Durham Constabulary
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
Emily McDowell Card that reads:
artCancer survivor Emily McDowell kicks back at the clichés
Arts and Entertainment
Twin Peaks stars Joan Chen, Michael Ontkean, Kyle Maclachlan and Piper Laurie
tvBadalamenti on board for third series
Life and Style
Standing room only: the terraces at Villa Park in 1935
Ben Stokes celebrates with his team mates after bowling Brendon McCullum
sportEngland vs New Zealand report
Amal Clooney has joined the legal team defending 'The Hooden Men'
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs General

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Guru Careers: Software Developer

£35 - 40k + Benefits: Guru Careers: We are seeking a Software Developer (JavaS...

SThree: Trainee Recruitment Consultant / Resourcer

£18000 - £23000 per annum + Commission: SThree: As a Trainee Recruitment Consu...

Ashdown Group: UI Developer - (UI, HTML, CSS, JavaScript, AngularJS)

£25000 - £40000 per annum: Ashdown Group: UI Developer - (UI, JavaScript, HTML...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine