Suspicious trades precede 19 percent of UK takeovers

A five pounds banknote is seen in front of displayed stock graph in this picture illustration

LONDON (Reuters) – Suspicious share trading, which could indicate insider dealing, preceded 19 percent of UK takeover announcements in 2016, according to Britain’s markets watchdog on Wednesday.

After a crackdown on insider trading there was a big drop in unusual market activity two days before takeover announcements, from around 30 percent to 15.2 percent between 2009 and 2014.

Having crept back up from that level, the Financial Conduct Authority (FCA) said in its annual report the level has now stalled, being the same in 2016 as it was in 2015.

“We will continue to monitor the results and gather market intelligence to enable us to draw robust conclusions about the underlying trend in insider trading activity,” the FCA said.

The FCA, which is among the few regulators to publish so-called market cleanliness figures, also said the number of enforcement cases it opened, which include market abuse and insider dealing, more than doubled to over 250 in 2016/17 from the previous year.

However, it also closed around 60 percent of those cases without imposing any penalties, compared with 24 percent in 2015/16, one lawyer noted.

“This surely prompts the question of whether investigations are now being opened simply to satisfy the criticisms leveled at the FCA in the Green report into HBOS, which said that the FCA was too cautious in its approach to opening investigations,” said Joanne Stephens, an associate at law firm Kingsley Napley.

The Green report, published by independent lawyer Andrew Green in 2015, investigated the causes of HBOS bank’s failure in 2008 and said authorities should review a decision at the time not to act against 10 executives.

(Reporting by Huw Jones; Editing by Elaine Hardcastle)