Insider dealing is illegal – no two ways about it, if you buy shares on the back of market sensitive information that has been slipped to you ahead of time by someone who should know better, then you are breaking the law.

Insider dealing is illegal – no two ways about it, if you buy shares on the back of market sensitive information that has been slipped to you ahead of time by someone who should know better, then you are breaking the law. The amount of this going on in the UK was revealed by the regulator, the Financial Services Authority last week, and the figures are surprising given how much time, money and effort is being put into cracking down on this market manipulation. According to the watchdog’s research, nearly a quarter of all takeovers in 2005 may have been preceded by insider dealing, even though the FSA has put new rules in place which are designed to prevent it. The FSA said that “informed trading” took place ahead of 23.7 per cent of takeovers in 2005, down from the even more astonishing 32.4 per cent the year before. But the actual number of instances rose, since takeover deals in 2004 stood at 102, and rocketed to 177 in 2005 as we started the merger and acquisitions boom. Disappointingly, the FSA did not outline which deals it suspected of being hit by insider dealing – surely if it has the wherewithal to identify when it is happening, it should not be shy about saying where. After all, naming and shaming is known to be an effective deterrent to malpractice. The watchdog is already in discussions with advisors, lawyers, printers, debt and equity providers and PR firms as part of its review on information leaks ahead of takeover deals. Of course, if you do know someone who is “in the know” it is tempting to try and make a quick buck. I knew, for example, that Pfizer was going to be launching a new drug for impotency before it went on sale – that was Viagra, and it was so effective it made its stock price rise significantly. But I did nothing about it, it would have been wrong to. Some people may think that is mad, I just think it is ethical. After all, take a look at Martha Stewart and the ImClone insider trading scandal. The US-based domestic guru has served five months in jail, five months under house arrest, and agreed to pay a $195,000 penalty. The US regulator, the Securities and Exchange Commission’s original complaint alleged that Peter Bacanovic, Ms Stewart’s broker, illegally tipped her off that Sam Waksal, the then chief executive of ImClone Systems, was selling his stock in the drug company. The penalty includes $45,673 of losses Ms Stewart avoided through the insider trade, interest of $12,389, plus a maximum civil penalty of $137,019 which amounts to three times the losses she saved. But people still prefer to take the chance than to play by the rules. The FBI has cracked open an insider trading ring on Wall Street, and 13 bankers and traders have been indicted on multiple illegal-dealing and bribery charges. The ring netted at least $15 million, the charges allege. I guess it isn’t still just Gordon Gecko on Wall Street who thinks that “Greed is good”.