Blue Index punished in FSA probe
June 1, 2009Andy 2 Comments »FT
The company at the centre of the latest probe by the financial watchdog into insider dealing is a City broker specialising in high-risk bets on share price movements, the FT has learnt.
The Financial Services Authority stripped Blue Index of its right to do regulated business after an operation this week involving six arrests and raids on eight properties in London and Essex, people familiar with the case said.
The investigation is part of a flurry of FSA activity on insider trading in recent months, although many lawyers say it is still too focused on small companies rather than household names.
The raids and arrests related to Blue Index’s trading in so-called contracts for difference, or bets on short-term changes in the values of shares, people with knowledge of the case said. The FSA declined to comment, although its website shows that Blue Index is now closed to regulated business.
IG Index, the spread-betting company, said it had this week terminated a contract to process trades on behalf of Blue Index after hearing that the FSA had closed the company to regulated business. Phil Gillett, sales trader at IG, said: ‘We have no further dealings with them.’
People who answered the phone at Blue Index’s City office declined to comment.
James Sanders and James Swallow, the two Blue Index directors named in Companies House records, could not be reached.
Blue Index is a small company that made a pre-tax profit of £123,000 ($199,076) in the year to September on turnover of just under £2.3m, according to Companies House records. As of April, Mr Sanders and Mr Swallow owned more than 95 per cent of the shares between them.
Blue Index’s website says the business is Britain’s leading broker in contracts for difference, where investors put forward small initial stakes that can yield big, quick returns but also risk potentially large losses. The company claims to have won a number of awards, including two last year from World Finance magazine.
The FSA gave no detail about the people it arrested during its raids, save that they were five men and one woman aged between 27 and 34. It was the third set of arrests the watchdog has made in the past 12 months in separate probes into organised insider dealing.
Thoughts: At last one of those so-called advisory brokerage firms being investigated; although perhaps not for the most obvious cause – I suspect a number of these brokers are guilty of churning client accounts. For the record BlueIndex employs 14 FSA-regulated traders and offers punters CFDs in individual shares, indices, commodities and foreign exchange.
Tags: blueindex, Financial Services Authority, FSA
Posted on June 8th, 2010 at 1:10 pm
I find it odd how the FSA have not looked into the account which Blue Index held with IG Index. From what I was told from a present employee on IGs shares desk, IG would frequently “follow” certain trades placed by either Blue Index or by Blue Index’s clients. So if Blue Index are guilty of some sort of insider dealing then surely IG are at fault for following (and profiting) from seeing the flow of business and furthermore for not even alerting the FSA to the size of winning trades being placed by Blue Index just before market sensitive information was released?
Posted on August 26th, 2011 at 1:39 pm
When you say follow i think you may mean hedge. As if a client is long and makes money and IG doesnt buy the shares in the underlying market then IG personally has to give the client the profits (of course it would keep the losses)