The UK’s financial regulator has struck again, and this time the FSA has nailed the big boys.
From the regulator on Wednesday:
FSA/PN/149/2009
04 November 2009
FORMER CORPORATE BROKER INTERN AND FATHER FOUND GUILTY OF INSIDER DEALING
Matthew Uberoi and his father, Neel Uberoi, were today found guilty of 12 counts of insider dealing at Southwark Crown Court. Neel Uberoi made about £110,000 profit based on inside information provided by Matthew Uberoi…
During the summer of 2006 Matthew Uberoi was an intern at a corporate broking firm working on takeovers and other price sensitive deals. He passed inside information to his father in relation to deals in three companies. His father then purchased shares in those companies and made substantial profits.
Mathew Uberoi worked as an intern at RBS Hoare Govett in 2006. While there, he allegedly leaked corporate announcements to his father using a complex sino-prandial code – one apparently deciphered by sophisticated regulatory techniques.
From the Times:
Trader ‘used Chinese food code’ for share deals
A work experience student at a City bank is alleged to have sent coded messages to his father telling him to buy Chinese food hours before the father bought shares in three companies that were about to make major announcements, a court heard today
What this all meant, in practice, was that Uberoi frequented punter bulletin boards – where he posted under the pseudonym “YouthfulTrader”. On these boards, he liased with his father, who went under the name “BlueForever”.
Uberoi would issue Chinese food-related instructions just before a price sensitive announcement, such as:
Blue[Forever], get involved with Chinese now.
and:
Lets have as much Chinese as we can…today will be the last day we can do this… all looks good on the Chinese front, think we should stock up.
Of course, all this Chinese food-related chat could have been perfectly innocuous; they could really just have been very hungry fellows.
And The Times report noted (our emphasis):
Neel Uberoi’s credit card records show[ed] he regularly ate at a local Chinese restaurant in Croydon.
But then…a hammer blow to the defence:
However, on several occasions instructions from Matthew relating to Chinese food were not followed by a visit to any restaurant, according to the credit card records, Mr Kelsey-Fry said.
Busted!
The Uberoi family were prosecuted for trading, among other stocks, in shares of a small UK bio-pharmaceutical company called Neutec Pharma. From the Times again:
Share trading records show that morning Neel had bought 3,000 shares in Neutec Pharma, a stock he had been buying up over the previous week and which was in takeover talks.
The next day Neutec, advised by Hoare Govett, announced it had agreed a takeover offer from Novartis, a Swiss rival, causing Neutec shares to more than double in price.
Interestingly, collaring insider dealing in Neutec pharma is becoming something of a rich seam for the FSA.
One of the other three insider dealing cases the city regulator is currently prosecuting involves insider trading offences relating to the very same company.
Curious.
Related links:
The FSA guide to insider dealing – FT Alphaville