By Daniel Hunter
In a prosecution brought by the Financial Services Authority (FSA) three people have pleaded guilty to insider dealing.
James Sanders a director of Blue Index, a specialist Contract for Difference (CFD) brokerage, had previously pleaded guilty to a total of 10 charges of insider dealing, his wife Miranda Sanders pleaded guilty to 5 charges of insider dealing, and James Swallow, a co-director of Blue Index, pleaded guilty to 3 charges of insider dealing at an earlier hearing. The defendants will be sentenced on 19 June 2012.
Christopher Hossain, a former senior trader at Blue Index and Adam Buck, a former employee of Blue Index, were today acquitted of insider dealing at a trial heard at Southwark Crown Court
Arnold McClellan, a senior partner in a large US accounting firm was ‘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. In addition, James Sanders encouraged clients of Blue Index to trade in CFDs on the basis of that inside information. The total profits generated by the defendants were approximately £1.9 million, while the total profits generated by the clients of Blue Index were approximately £10.2 million.
This case is significant as it involved a parallel investigation by the US Securities and Exchange Commission (SEC) and US Department of Justice (DoJ), together with the Federal Bureau of Investigation (FBI). As a result of action taken by the SEC, Annabel McClellan reached a settlement which included the payment of a $1 million fine. Mrs McClellan also pleaded guilty to a charge brought by the DoJ and is currently serving an 11 month prison sentence without parole.
“James and Miranda Sanders orchestrated a long running, sophisticated and very profitable scheme," Tracey McDermott, acting director of enforcement and financial crime division, said.
"They no doubt thought that using information about US deals would make it more difficult for us to pursue. They did not count on the increasingly effective cross-border cooperation in these types of cases. We, and our overseas counterparts, are committed to working together to tackle abuse wherever it occurs.
“Sanders and Swallow abused their position as approved persons. They used Blue Index, an authorised firm, as a vehicle for their criminal conduct and cynically exploited the inside information they had illegally obtained to try and improve its reputation and profitability for their own benefit. This case should send a clear message about our willingness, and ability, to tackle serious, organised insider dealing”
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