A husband and wife plus another person have been jailed at Southwark Crown Court in the UK after pleading guilty to insider dealing offences, the Financial Services Authority said of a case that involved the regulator working alongside its counterparts in the US.  

James Sanders, a director of Blue Index, a specialist contract for difference brokerage, his wife Miranda Sanders and James Swallow, a co-director of Blue Index, were sentenced for insider dealing contrary to section 52 of the Criminal Justice Act 1993.

James Sanders was sentenced to four years in custody and disqualified as a director for five years; Miranda Sanders was sentenced to 10 months in custody; and Swallow was sentenced to 10 months in custody. Confiscation and costs orders will be dealt with at a later date, the FSA said in a statement.

Systemic

“This was a case of systematic abuse by approved people of their privileged position in the market - we are determined to stamp out such abuse. Our tough, coordinated approach to insider dealing and our commitment to taking on difficult criminal prosecutions has really begun to pay off, ” Tracey McDermott, acting director of enforcement and financial crime division at the FSA, said.

“These three individuals funded very comfortable lifestyles by cheating the system and other honest investors. No doubt as they prepare to spend their first night behind bars they will be reflecting on the consequences of their greed. Others who might be tempted to do the same should be in no doubt about our continued commitment to use all of the tools at our disposal to tackle those who abuse the market,” she said.

James Sanders had previously pleaded guilty to a total of ten charges of insider dealing, Miranda Sanders pleaded guilty to five charges of insider dealing, and James Swallow, pleaded guilty to three charges of insider dealing.

Arnold McClellan, a senior partner in a large US accounting firm was an ‘insider’ to a number of mergers and acquisitions in US securities listed on the NYSE and NASDAQ exchanges, the FSA said in its statement.

Leak

Inside information was leaked by Arnold McClellan, Miranda Sanders’ brother in law, or her sister Annabel McClellan, and passed to James and Miranda Sanders who used the information to commit insider dealing in those US securities between October 2006 and February 2008.

James Sanders also disclosed information to others including James Swallow, who used that information to commit insider dealing. In addition, James Sanders encouraged clients of Blue Index to trade in CFDs on the basis of that inside information. The total profits generated by the defendants were approximately £1.9 million (nearly $3 million), while the total profits generated by the clients of Blue Index were approximately £10.2 million, the FSA said.

“This case is significant as it involved a parallel investigation by the US Securities and Exchange Commission and US Department of Justice, together with the Federal Bureau of Investigation,” the FSA said.

Annabel McClellan reached a settlement which included the payment of a $1 million fine. She also pleaded guilty to a charge brought by the DoJ and is currently serving an 11 month prison sentence without parole.

The FSA has so far secured 11 further convictions in relation to insider dealing and is currently prosecuting 11 other individuals for the same offence.