City investigates fears of a new insider dealing ring

Financial regulators are investigating evidence that a new insider dealing ring may be operating in the City and cashing in on takeover bids for listed companies.

In the past week alone, there have been four instances where bids or takeover approaches for quoted companies have been preceded by a sharp rise in their share prices and heavy buying of their shares.

Insider dealing rings, made up of professionals who pass tips to each other about bids and then profit by buying shares, were made illegal in the 1980s but successful prosecutions are rare because it is difficult to prove. The Financial Services Authority is believed to be investigating unusual share movements in four companies: the supermarket chain Somerfield; the mobile operator mmO2; the security firm Chubb; and Amey, one of the companies selected to take over the London Underground.

Shares in both Amey and Chubb rose sharply before the announcement of bid approaches yesterday. Amey has agreed to be taken over by a large Spanish construction company for £81m while Chubb said it had received a bid approach but declined to identify the bidder. Somerfield shares rose sharply before it too announced that it had received a £500m bid approach.