Mon. Oct 14th, 2019

Planet Compliance

Innovation & Regulation in Finance

Two convicted of insider dealing in Operation Tabernula trial

5 min read

The Financial Conduct Authority (FCA) today published a statement in relation to the conviction of two for insider dealing. In a case brought by the FCA and following a three-month trial at Southwark Crown Court, two defendants, Martyn Dodgson and Andrew Hind – a senior investment banker and a Chartered Accountant – have been convicted of conspiring to insider deal between November 2006 and March 2010.

Three other defendants, Andrew Grant Harrison, Ben Anderson and Iraj Parvizi, have been acquitted. Sentencing will take place on a date to be fixed.  Confiscation proceedings will also be pursued against both defendants. This investigation was conducted in partnership with the National Crime Agency.

The guilty defendants

Martyn Dodgson (5 October 1971) – during the period covered by the indictment Dodgson was employed by Morgan Stanley, Lehman Brothers and Deutsche Bank. He worked at Morgan Stanley as a Vice President in Global Capital Markets until January 2007, and then at Lehman Brothers as an Executive Director in the European Investment Banking Division from July 2007 to September 2008. He moved to Deutsche Bank in October 2008 as a Director in the Corporate Broking Department and was later promoted to Managing Director. Dodgson was Financial Services Authority (FSA) approved throughout the period.

Andrew Hind (16 April 1960) – is a businessman, a property developer and a qualified Chartered Accountant.

Mark Steward, Director of Enforcement and Market Oversight, said

“This was an extraordinary and complex case of a type not prosecuted in this country before.  The message is loud and clear that the FCA will not tolerate sophisticated predatory criminals abusing our markets.  This case demonstrates our capability and determination to root out this kind of abuse and ensure our market and the investing public are properly protected.

Dodgson was an experienced and well-paid banker, well aware that what he was doing constituted a criminal offence and who conspired with Hind to abuse our market and to profit at the expense of the investing public.  The FCA is committed to detecting this kind of abuse and make the perpetrators fully accountable in accordance with the law.”

Overview of the facts

Dodgson and Hind, who were close personal friends, instigated this insider dealing conspiracy. They agreed to deal secretly, sometimes on the basis of inside information.

Dodgson sourced inside information from within the investment banks at which he worked, either through working on transactions himself or through being able to glean what his colleagues were working on.  He passed on this inside information to Hind who acted as a ‘middle man’.  Hind then effected secret dealing for the benefit of Dodgson and himself.

The defendants put in place elaborate strategies designed to prevent the authorities from uncovering their activities. These included the use of unregistered mobile phones, encoded and encrypted records, safety deposit boxes and the transfer of benefit using cash and payments in kind.

In many cases Dodgson or his employer was advising or connected with the company traded or the corporate transaction.  The FCA relied on five acts of insider dealing to prove this conspiracy.  The trading profits were distributed via large cash payments and payments in kind.

The five acts of dealing related to the following companies:

  • Scottish & Newcastle plc in October 2007;
  • Paragon Group of Companies plc in July 2008;
  • Just Retirement plc in October 2008;
  • Legal & General plc in February 2009; and
  • BSkyB plc in March 2010.

The Operation Tabernula investigation

This has been the FCA’s largest and most complex insider dealing investigation. The offending in this case was highly sophisticated and took place over a number of years. The investigation (conducted in partnership with the National Crime Agency) was demanding and time-consuming. Investigators, forensic accountants, lawyers, markets experts, intelligence analysts and digital forensic specialists pooled their skills to unravel the conspiracy.  This was achieved through painstaking analysis of trading, financial and communications data, documentary evidence from the investment banks, and the material seized during searches under warrant. Surveillance was also deployed.

These two convictions – alongside those of Paul Milsom, Graeme Shelley and Julian Rifat – brings to five the number of convictions secured in the Operation Tabernula insider dealing investigation.

In its statement the FCA expressed its thanks to the many organisations and individuals who provided assistance to the investigation, in particular,  the National Crime Agency and the compliance departments and individual employees and ex-employees of Deutsche Bank, Lehman Brothers in Administration, Nomura, Panmure Gordon and Morgan Stanley.

The FCA statement and related information can be found here.

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