Insider trading stomps London market

Stephen Beard Mar 12, 2007


MARK AUSTIN THOMAS: A $19 billion bid for Britain’s largest chain of pharmacies, Boots, has been overshadowed by rumors of insider trading. The bid, launched on Friday by U.S. private equity firm Kohlberg Kravis Roberts, was preceded by suspicious share price movements. From London, Stephen Beard has more.

STEPHEN BEARD: When it was announced on Friday afternoon that KKR was making a bid for Boots, the company’s share price leapt by 10 percent.

But it had already jumped by 4 percent in the hours leading up to the announcement.

This came just two days after Britain’s main financial regulator, the FSA, made a damning announcement about insider trading.

The FSA said that in 2005 one quarter of all takeover and merger deals in London were preceded by suspicious share trading activity.

This is dangerous, says Deborah Hargreaves, business editor of the Guardian newspaper. It could undermine confidence in the London stock market.

DEBORAH HARGREAVES: I was talking to the head of compliance at one of the investment banks and I said to him, a€˜If you were a man in the street would you invest your money in the stock market?a€™ and he said ‘No, absolutely not, because there’s so much of this dodgy dealing and it can’t be stamped out.’

But insider dealing is notoriously difficult to prosecute. There’s been only one conviction in Britain over the past five years.

In London, this is Stephen Beard for Marketplace.

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