FSA Wins first criminal sentence for insider trading
Losses and Lawsuits
LONDON - Solicitor Christopher McQuoid and his father-in-law James William Melbourne are the first recipients of insider trading criminal convictions and prison sentences as a result of the UK Financial Services Authority (FSA)'s tougher approach to market abuse. Both were given eight-month sentences, McQuoid's starting immediately and Melbourne's suspended for 12 months.
Both men were found guilty of insider trading at Southwark crown court. Jurors decided that McQuoid had passed inside information to his relative who had then traded, using the information for profit. The regulator had previously obtained a court order freezing the £50,000 profit made from the trades and split equally between the two criminals.
"This was the first of the FSA's prosecutions and the first to get through the rigours of a contested trial," says Tony Woodcock, partner at law firm Stephenson Harwood in London. "The FSA will regard the verdict as a vindication of its 'credible deterrence' strategy and it will, no doubt, encourage the FSA to continue down its path of bringing criminal prosecutions. However, although it shows that the current law can get results, the offence itself remains a tough one to prosecute. As the acquittal of Euan Carlisle in the Belgo case shows, the success of the FSA's other criminal prosecutions is by no means a done deal."
McQuoid was general counsel at communications firm TTP between August 2000 and March 2007. In May 2006, he was told in confidence that Motorola was planning to take over the company. Two days before the takeover was made public, Melbourne bought 153,824 TTP shares at a price of £0.13 per share - the first time he had ever bought TTP shares. On June 1, the Motorola deal was announced at an agreed share price of £0.45. Melbourne pocketed a profit of £48,919.20, which three months he later split with his son-in-law.
In a new FSA insider trading case, the regulator announced on March 31 that police had arrested two people as part of its investigation into an organised insider dealing ring. Search warrants were also executed by the FSA at a number of London addresses. The operations were conducted by 25 FSA staff, assisted by 11 officers from the City of London Police.
More on Regulation
7 days in 60 seconds
AIG, US Treasury reforms and a Brexit deadline
The week on Risk.net, October 13–19, 2017
Receive this by email