FSA insider trading probe Operation Tabernula claims first scalp

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The FSA’s continuing focus on taking aggressive action against insider dealing claimed another scalp yesterday with the sentencing of Paul Milsom to two years in prison and the making of a confiscation order against him for £245,000.

The successful prosecution is the first of several intended to be brought under what has been reported as the UK’s largest insider dealing investigation to date, Operation Tabernula. Six further criminal cases are pending.

Since 2008, when the FSA had not brought a single criminal case for insider dealing, a much more active stance has steadily increased the number of criminal cases investigated and brought before the Courts, a trend which seems set to continue. This latest case follows the 10 criminal convictions secured last year and the four year sentence handed down in one of those to James Sanders of Blue Index.

In parallel with the FSA’s and SOCA’s prosecution of criminal cases under the Criminal Justice Act 1993, the FSA continues to actively assert its FSMA civil powers, making a total of 11 enforcement decisions in 2012.

Mr Milsom’s offence was of improper disclosure of inside information, which, like all criminal insider dealing offences, carries a maximum sentence of seven years. Despite the repeat offences over several years and their central aim being one of personal gain, Mr Milsom’s sentence was reduced to take account of his early guilty plea and his entering into a plea agreement with the FSA, one of the first times such an arrangement has been used. The FSA obtained the power to enter into plea agreements in 2010 after extensive lobbying. It saw the ability to plea bargain and grant immunity as key to its objective of prosecuting insider dealing. Commentators at the time speculated that the FSA would find it difficult to gather sufficient evidence to convince suspects to cooperate at such an early stage. However, it may yet be that this becomes a familiar part of the regulatory enforcement landscape as we move into the post-FSA era. 

 

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