Shah & Co-defendants prosecuted by Financial Services Authority

Posted on 27/07/2012 · Posted in Criminal Cases, Financial Litigation

Insider dealing under Criminal Justice Act 1993

This is a criminal case which involved the FSA prosecuting a number of Defendants including financial adviser Paresh Shah for insider dealing contrary to section 52 of the Criminal Justice Act 1993.

The allegations of insider dealing stemmed from a number of deals made by the Defendants between 2006 and 2008. The Defendants obtained highly confidential and sensitive information that was leaked from the print rooms of 2 major investment banks. They were particularly interested in information concerning takeover bids. It was their strategy to invest heavily in the shares of companies involved in a takeover in advance of any takeover announcement expecting share prices to rise significantly when the takeover became public knowledge. The Defendants minimised the risk of detection by conducting the deals across many different trading accounts.

The FSA launched an investigation into the activities of the Defendants and were forced to examine countless trades and records. In the interest of simplicity at trial, the prosecution focused only on deals related to 2 companies and a profit of approximately £730,000. In reality it is probable that the insider dealing was far more extensive.

The jury at Southwark Crown Court found 6 Defendants guilty of insider dealing. In handing down sentence the judge commented that insider dealing in this case was not isolated criminal behaviour and the 6 will serve prison sentences ranging from eighteen months to three and a half years.

The case is a milestone for the FSA. It has proven that it has the resources to successfully prosecute for insider dealing.

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