A recent criminal conviction secured by the Financial Conduct Authority (FCA) in a case of insider trading highlights the UK regulator’s intention to proactively crackdown on cases of market abuse – not just with criminal prosecutions but through the enforcement of regulation too, a former senior market regulator has said.
Anthony Harrison of Pinsent Masons, who specialises in market abuse cases, was commenting after Mohammed Zina was found guilty of six offences of insider dealing and three offences of fraud following a 12-week trial at Southwark Crown Court.
The FCA brought the prosecution against 35-year-old Zina, a former Goldman Sachs analyst, after an investigation found that Zina had used information relating to potential mergers and acquisitions that his employer was advising on to inform his trading of shares in six companies. Zina stood to profit by approximately £140,000 from the activity, the FCA said.
Steve Smart, joint executive director of enforcement and market oversight at the FCA, said: “Mohammed Zina tried to cheat the market for his own personal gain by cynically trading on inside information. This conviction sends a clear message that economic crime is on our radar, and we will take action to uphold the integrity of UK markets.”
Harrison said: “This is a significant win for the FCA: market abuse cases can be conceptually complicated – particularly over what amounts to ‘inside information’ – and, in a criminal context, there needs to be proof of certain mental elements to secure a conviction, which can be challenging to establish to a criminal standard. Persuading a jury to convict in such cases is not straightforward.”
“The pursuit of this type of case also underscores the FCA’s intent to be proactive in market abuse cases – not just criminal ones, but in a regulatory context under the Market Abuse Regulation, which does not require the same high burden and standard of proof compared to the criminal regime. That sentiment is clear from the comments of Steve Smart,” he said.
“Whilst this case was confined to the breach of trust of a particular individual, there may be other instances of market abuse where the regulator could have cause to question the adequacy of a firm’s wider systems and controls and governance. The case therefore serves as a useful reminder for firms and other companies, who are subject to the market abuse regime, to keep internal surveillance systems and other controls in this area under close review,” Harrison said.
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