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19 Jan, 2018 08:43

White-collar criminals laughing all the way to the bank as government chases welfare cheats

White-collar criminals laughing all the way to the bank as government chases welfare cheats

With fewer than ten prosecutions for insider trading in the past five years, new data has revealed that white-collar criminals are slipping through the cracks. Meanwhile, 10,000 welfare cheats were prosecuted in a year.

A freedom of information request to the chief City watchdog revealed just how little was done to stop white collar criminals in their tracks. In the past five years, the Financial Conduct Authority (FCA) has prosecuted just eight cases of insider trading, resulting in a mere 12 convictions. In comparison, more than 10,000 people were prosecuted or penalized for welfare fraud in 2016 alone.

In 2017, the equivalent of 63 full-time staff at the watchdog worked on insider trading investigations. At the welfare department, nearly 4,000 staff investigated those fiddling their benefits.

In an analysis conducted by the Times into share price patterns, fluctuations were found to be suspiciously large in many cases.

“For example, the day before Provident Financial, a FTSE 100 lender, announced a profit warning last year, its share price slumped by almost 6 per cent, wiping £170 million from the value of the company,” the newspaper said in its investigation.

“The following day, when the warning was officially issued, the share price collapsed by a further 67 percent, saving tens of millions of pounds for the investors who had sold the previous day.

“Private investors with no access to inside information will have seen their holdings almost wiped out.”

Provident Financial’s share price had been in decline by about 0.6 per cent a day since an earlier profit warning. There was speculation that another profit warning was on the way, but the day before it was announced share prices dropped dramatically – almost ten times more than the daily average fall over the preceding two months.

The Times did admit that there is no direct evidence that any information was leaked in relation to the drop in trading. The movement in share price could have been caused by other, legitimate information.

“Given the scale of regulation nowadays these figures are really surprising and suggest insider dealing is still a major problem,” Research director at the investment broker Hargreaves Lansdown Mark Dampier said.

“Thirty years ago it was almost seen as a perk of the job but times have changed as understanding has grown about how it damages confidence in the markets.

“Getting the evidence to launch a prosecution is not easy but you have to wonder whether the regulator has been distracted since the financial crisis.”

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