In another example of the FSA flexing its muscles and applying the full weight of the law upon the pond-life that are City insiders, it is pleasing to see 3 former Directors of the CFD trading house given jail sentences today. They were found guilty of breaking section 52 of the Criminal Justice Act 1993.
James Sanders and his wife Miranda were sentenced to 4 years and 10 months respectively whilst a co director – James Swallow as sentenced to 10 months too. Confiscation and costs orders will be dealt with at a later date.
Arnold McClellan, a senior partner in a large US accounting firm was an ‘insider’ to a number of mergers and acquisitions in US securities listed on the NYSE and NASDAQ exchanges. The prosecution case was that inside information was leaked by Arnold McClellan, Miranda Sanders’ brother in law, or her sister Annabel McClellan, and passed to James and Miranda Sanders who used the information to commit insider dealing in those US securities between October 2006 and February 2008.
James Sanders also disclosed information to others including James Swallow, who used that information to commit insider dealing. Mr Sanders also encouraged clients of Blue Index to trade in CFDs on the basis of that inside information. Total profits generated by the defendants were estimated at just under £2million. It is understood that clients of Blue Index reaped around £10.2 million of unwitting illegal gains.
Passing sentence Mr. Justice Simon, said they were “Deliberate and calculated acts of dishonesty” and that as directors of an FSA authorised company Sanders and Swallow were responsible for ensuring that “Blue Index complied with its obligations to act honestly and competently. In addition James Sanders was head of compliance with additional obligation of ensuring that there was no insider dealing. He failed in that duty.” That’s an understatement. The issue of Worldspreads and ‘failing’s springs to mind…
“This was a case of systematic abuse by approved people of their privileged position in the market – we are determined to stamp out such abuse,’ said Tracey McDermott, acting director of enforcement and financial crime division at the FSA. Our tough, coordinated approach to insider dealing and our commitment to taking on difficult criminal prosecutions has really begun to pay off.
She elaborated further with a stark warning to many of these ‘spiv’ brokers plying their wares in the City today – “These three individuals funded very comfortable lifestyles by cheating the system and other honest investors. No doubt as they prepare to spend their first night behind bars they will be reflecting on the consequences of their greed. Others who might be tempted to do the same should be in no doubt about our continued commitment to use all of the tools at our disposal to tackle those who abuse the market.”