The number of dawn raids conducted by the Financial Services Authority almost halved in one year, with only 11 raids conducted in 2012, down from 21 raids in 2011, says City law firm RPC.

RPC says that the number of dawn raids peaked in 2009 (37 raids) and 2010 (36). During this period, the Financial Services Authority (FSA) made an explicit commitment to tackle insider trading and other forms of market abuse. Since 2010, the number of raids has fallen sharply.

Steven Francis, regulatory partner at RPC, says: “We think that the FSA’s programme of raids has been a significant deterrent to potential insider traders, and the level of insider dealing has fallen to the point where the regulator has been able to shift some of its focus elsewhere.”

“Inside dealers now know that they are dealing with a regulator that will not hesitate to level its full arsenal of investigatory powers at them. High profile raids, criminal prosecutions and custodial sentences are all making insider traders think twice about passing on or acting upon insider information. Organisations may also be more likely to undertake comprehensive internal crackdowns on leaks.”

RPC explains that evidence for the success of the FSA’s high-profile clampdown on insider trading may be seen in recent market cleanliness data produced by Cass Business School. This report showed that just 13% of UK M&A deals were preceded by suspicious trades between 2010 and 2012, compared with 19% between 2008 and 2009, and 22% between 2004 and 2007.

RPC says that a spate of raids on alleged insider dealers in February 2013 shows that cracking down on this form of financial crime is still a priority for the regulator.

“Those in a position to engage in insider trading or other forms of market abuse need to be aware that the regulator will use all the means available to it to keep the markets clean,” Francis adds.

“The FSA has received more publicity in recent months for its work on wider regulatory issues in banking, such as LIBOR rigging and Payment Protection Insurance misselling. However, these recent raids on suspected insider traders show that the regulator is still putting resources into fighting financial crime.”

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