LONDON (Reuters) - One insider dealing suspect arrested last month in the country's largest crackdown on market abuse could have turned informer to help build a case against six other suspects, lawyers and traders believe.
Mystery continues to shroud the identity of one man and the most likely explanation is that he is helping nail an insider dealing ring dubbed "sophisticated and long-running" by the Financial Services Authority (FSA), experts say.
"The speculation is definitely that it is the whistleblower," says Ash Saluja, a partner at London law firm CMS Cameron McKenna.
"It has always been very difficult to get enough evidence to charge people for insider dealing or market abuse. The easiest thing is to collect enough evidence against one person and say: 'we have enough ... to charge you but you can make it easier on yourself if you cooperate with us and name the other people involved'".
Hours after squads of regulators and police raided 16 premises on March 23, the names of six men detained -- and those of the venerable financial institutions that once employed them or continue to do so -- started filtering into the market.
Those arrested included Martyn Dodgson, a managing director of Deutsche Bank; Clive Roberts, head of sales trading at Exane, partly-owned by BNP Paribas SA, and Julian Rifat, an equity trader at the London arm of Moore Capital, one of the world's largest hedge funds.
The other three were Graeme Shelley, a trader at brokerage Novum Securities and private investors Iraj Parvizi and Ben Anderson. But silence surrounded the seventh person.
"It'll almost certainly be the whistleblower -- and is likely to be a big name," said one former head of equity derivatives.
LONG HAUL
The FSA, whose outgoing Chief Executive Hector Sants has warned financial markets grown complacent under the regulator's previous soft touch approach to sit up and "be afraid," declined to comment on an on-going investigation.
Legal sources involved in the case say the FSA is expected to extend bail on Moore Capital's Rifat from three months to six to be in line with others arrested.
But the FSA is unlikely to be ready to lay charges by November, as it embarks on sifting through hundreds of thousands of electronic files and scores of individual trading accounts, as well as taking hundreds of witness statements.
In a similar insider dealing case, which will first be heard before the court Wednesday, the FSA took 21 months to charge seven insider trading suspects.
"I'm not expecting any charges for a year or so," noted another lawyer.
Margaret Cole, the tough-talking litigator who heads the enforcement wing of the FSA, has pushed financial crime to the top of the regulator's agenda amid public outrage at having to foot an 850 billion pound bill for bailing out Britain's banks in the wake of the credit crisis.
There is much to do. FSA figures show unusual share price movements -- a potential indicator of market abuse -- in just over 29 percent of takeover announcements in 2008.
But despite being now able to offer informants immunity from prosecution, the FSA had to date clinched just five prison sentences, one of which was suspended.
"The FSA have brought insider dealing cases without whistleblowers, but they were very straight forward ones so far where the evidence was pretty much there for everybody to see," notes Philip Parish, a partner at law firm Lovells.
"But the truth is that, much like in cartel cases, (in more sophisticated cases) you have to have someone who is prepared to whistleblow on everybody else".
Additional reporting by Louise Heavens
Reuters UK
