Signs of UK insider trading fell to five-year low in 2023, FCA says

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Indications of potential insider trading have declined to five-year lows even though suspicious stock market moves still occurred before 30 per cent of UK takeover announcements last year, the financial watchdog said on Monday.

The drop in suspicious market activity came as the Financial Conduct Authority this year secured its first two convictions for insider trading since 2019 following a crackdown by the regulator.

The FCA said it detected abnormal trading volumes of shares and derivatives ahead of 5.6 per cent of price-sensitive announcements in 2023, the lowest since data collection began in 2018.

Potentially anomalous trading before market-sensitive announcements also fell to its lowest on record, dropping to 3.3 per cent last year. 

But suspect stock market moves took place before 30.3 per cent of takeovers involving UK-listed companies, down from 35.3 per cent a year earlier. The figures reflect a change in the FCA’s methodology to include intraday trading and adjust for market volatility.

Claire Cross, a former FCA official who is now a partner at law firm Corker Binning, said the regulator had “continued to make a concerted effort to crack down on insider dealing” and this “may well have deterred some individuals who might otherwise have committed this form of market abuse”.

The data came after the FCA secured a guilty verdict for insider trading and fraud against a Goldman Sachs analyst who was given a 22-month prison sentence in February, after his brother, a former Clifford Chance lawyer, was acquitted in the same case.

The watchdog also successfully prosecuted a manager of plastic manufacturer RPC in March for using inside information to trade in its shares ahead of the acquisition of a rival.

In October, the FCA said it had charged two brothers, Matthew West, 43 and Nikolas West, 45, with conspiracy to deal in the shares of four companies while benefiting from inside information.

While the data seemed to be heading in the right direction, Cross said the decline in suspicious activity could indicate that insider dealers were becoming more sophisticated. 

“They are aware of what is likely to catch the FCA’s attention and tailor their trading accordingly,” she said. “As such they are less likely to be trading in a fashion that is captured by the methodology utilised to obtain these results.”