FCA suspects insider dealing in almost 25% of activity in 2020

The Financial Conduct Authority found examples of possible insider dealing in 21.9% of the activity it monitored in 2020, up from 17.5% in the previous year.

It follows warnings from the watchdog’s enforcement chief that there had been a dramatic increase in online scams and fraud during the pandemic as people spent more time on the internet. Mark Steward, the Financial Conduct Authority’s executive director of enforcement and market oversight, also told Financial News in early 2020 that the regulator was bracing for an uptick in market abuse cases as a result of the virus crisis.

As part of the FCA’s  “market cleanliness” analysis, the watchdog studies share price movements in the two days prior to takeover announcements and issues an annual report indicating the level of insider trading in UK equity markets.

Its latest figures, published in the FCA’s annual report for the year to April 2021, found suspicious activity ahead of 21.9% of takeover announcements in 2020.

In 2019, the watchdog saw abnormal price movements ahead of 17.5% of announcements, according to its 2019/20 annual report. In 2018, it found suspicious activity ahead of just 10% of announcements.

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Charles Randell, the chair of the FCA said, alongside the release of the annual report, that the past 12 months had been “a challenging year for everyone – the people we serve, the industry we regulate, and all of us at the Financial Conduct Authority”.

“We prioritised protecting vulnerable people. We helped millions of people and hundreds of thousands of businesses, large and small, through the Covid-19 pandemic,” he said.

Nonetheless, the FCA’s potentially anomalous trading ratio, introduced last year to bolster its studies into market cleanliness, found potentially anomalous trading ahead of 6.9% of price-sensitive news announcements studied, up slightly from 6.7% in 2019. The FCA ratio determines anomalous trading as instances in which the trader involved does not typically trade in the instrument in question,  traded significantly more in the direction of the announcement, or made a significant profit from trading positions established in the period immediately prior to the announcement.

Elsewhere in the annual report, the watchdog reported that the regulator-in-chief for UK markets earned £224,000 in his first six months in post. Nikhil Rathi took over as chief executive officer at the FCA in October 2020 for a five-year term. The watchdog said at the time of his appointment in mid-2020 that Rathi would be paid an annual salary of £455,000, a 12% pension, and would not receive a bonus.

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His pay packet is a fraction of the salaries earned by some of his predecessors.

Martin Wheatley, chief executive of the FCA for four years to September 2015, earned a total of £701,000 in the 12 months to April 2015, compared with £610,000 the previous year, according to the FCA’s annual reports over that time period.

Andrew Bailey earned £592,000 in his last year as FCA chief, according to the watchdog’s annual report for the year to April 2020.

Rathi’s immediate predecessor interim chief Chris Woolard earned £413,000 while in the top job, however.

The publication of the FCA’s annual report for the year to April 2021 follows the release of its business plan. That document detailed the watchdog’s regulatory priorities for the year ahead, the first such paper under Rathi’s tenure and following the UK’s transition into Brexit in December 2020.

In a speech announcing the plan, Rathi poured cold water on the prospect of a post-Brexit regulatory race to the bottom for standards, outlining its goal to make sure UK rules “remain at least equivalent” to those in effect within the EU.

He added that the FCA planned to toughen up its regulatory requirements for new entrants to UK markets and to spend £11m on a digital marketing campaign to warn investors over the risks of putting their money into cryptocurrency.

To contact the author of this story with feedback or news, email Lucy McNulty

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