Over 100 officers from the Financial Conduct Authority and National Crime Agency carried out coordinated raids on five residential premises across London and Manchester on Tuesday.
Three people were arrested as part of the joint operation targeting what authorities described as a “criminal insider dealing ring” operating within UK financial markets.
Investigators seized more than 30 phones, computers, and tablets during the raids, with suspects taken to police stations for interview following the operation.
Steve Smart, executive director of enforcement and market oversight at the FCA, confirmed the scale and seriousness of the crackdown in a statement issued after the arrests.
“Insider dealing is a serious threat to the integrity of our markets. Working with partners, we will continue to use all the powers at our disposal to crack down on serious and organised crime groups engaged in market abuse,” Smart said.
FCA chief Nikhil Rathi had been speaking to MPs on Tuesday morning and told policymakers that a “very major operation” was underway “against some very serious suspected criminal activity.”
Rathi stressed that the regulator was taking increasingly assertive action against a wide range of parties who may be involved in the inappropriate sharing of sensitive market information.
“We are taking increasingly assertive action, including with the Takeover Panel, with the sell-side institutions but also the army of advisers and others who get involved in these situations and potentially may be privy to information which could be made available inappropriately,” Rathi told policymakers.
The FCA boss also acknowledged that some leaks may not constitute insider trading, noting tactical motivations in corporate finance transactions can sometimes drive the inappropriate release of information.
“Sometimes there may be leaks because a participant in a corporate finance transaction considers there may be some tactical advantage around leaking in terms of securing a better price or securing some commercial advantage,” Rathi said.
The FCA had previously identified abnormal share price movements in a record 41 per cent of takeovers before deal announcements were made public, a figure Rathi described as a serious concern.
While some of that unusual trading activity may have been driven by media speculation, Rathi warned that organised criminal networks were operating at the heart of the problem.
“Sometimes we are dealing with organised criminal groups who are highly, highly sophisticated and highly professional and for whom this is a very profitable business model in our market but [also] many, many markets around the world,” he said.
The latest arrests build on a strong enforcement record from the previous year, when the watchdog secured four insider dealing convictions, with two resulting in record sentences totalling 11 years of imprisonment.
Twelve individuals were also fined a combined total of 1.7 million pounds for insider trading, market manipulation, and making misleading statements during that same period.