Guilty or not, UK probe could ruin those named

Date: Wednesday, March 31, 2010
Author: Reuters

The City of London traders and brokers arrested last week on suspicion of insider dealing are likely to find their finance careers are over regardless of whether any crime is proven.

Bankers and headhunters said the very suggestion the men had used access to privileged information to enrich themselves, meant they were unlikely to keep their jobs, or find other employment in the industry.

"You'd almost hope that the guys aren't innocent because if they are, it's pretty scary," said a senior banker who knew one of those arrested in the Financial Services Authority (FSA) probe.

Of the seven men detained, four have been identified by City sources and in the media as senior employees of finance houses.

These are Clive Roberts, head of European sales at BNP Paribas's partly-owned Exane brokerage unit; Martyn Dodgson, a corporate broker at Deutsche Bank; Julian Rifat, an equities trader at hedge fund Moore Capital; and Graeme Shelley, an equities trader with small brokerage Novum Securities.

Two of the others, Iraj Parvizi and Ben Anderson, are private investors. The seventh has not been identified.

Roberts, Dodgson, Rifat and Shelley are either on leave or have been suspended, their employers said. Technically, they can continue to work as they have not had their FSA "approved person" status suspended, according to the regulator's website.

Yet their employers' concern for their corporate reputations means it is inconceivable the men would be allowed to return to their desks until their names are cleared, industry sources said.

As with previous insider dealing cases, it will likely take over a year to bring charges in this case, and another year to conclude any trial, FSA sources said.

Leave rarely lasts that long.

"If these people can no longer go about doing their day-to-day jobs, because of the concerns or the uncertainty, then I suspect that individual organizations will reach some kind of agreement with the individuals concerned," said a source close to one of the men's employers.

NOT ON THE PAYROLL

Even if Roberts, Dodgson, Rifat and Shelley remain on their employers' payrolls -- they cannot be fired for being under investigation -- they have already suffered a big hit.

The FSA has frozen their assets, allowing them just 300 pounds ($451) a week to cover all costs including household bills, mortgages and school fees.

Also, such professionals' pay is usually mainly in the form of a discretionary bonus that is tied to fee income or trading profits that they will now be unable to generate. Unless they go back to work, they won't be making any bonus.

Finding alternative employment will also be a problem, even if no charges are brought or the men are acquitted.

"Mud sticks," said Stephen Pearce, director of City head hunter Kennedy Pearce. "It would be very difficult for these people to recommence their careers."

Pearce noted that two appointments his firm was recently close to agreeing were canceled at the last moment because the candidates had poor credit checks.

The subject of an earlier FSA censure for insider dealing, hedge fund manager Philippe Jabre, who was fined 750,000 pounds in 2006, did manage to rebuild his career. He quit London and set up his own hedge fund in Geneva.

This is not seen as an option for the four City dealers.

"Jabre was in a different league," the banker said. "These guys wouldn't have that kind of money."

Potential recruiters overseas are likely to be as deterred by the FSA actions from hiring the men as UK institutions.

"What could be worth it to take that risk? No-one's that good," said a dealer who previously worked with one of those arrested.

Financial services professionals say they welcome attempts to stamp out insider dealing but are critical of a process of enforcement whereby suspicions that are years away from being aired in court can ruin careers instantly.

"It's at least as appalling a process as the allegations made against the individuals," a source at one bank said.

Bankers feel the damage to the career of a finance professional who is found not guilty of any crime is much greater than to people in other industries who face criminal or professional investigations of their conduct.

"Lawyers and most other people could do something related to their profession," one lawyer said.

However, after billion of pounds spent bailing out the banking sector and public outcry over bonuses, bankers don't expect the FSA to be under any political pressure to speed up their probe.

The FSA, which has not named those arrested or said what trading it is investigating, says the length of the process reflects the complexity of the activities involved.

Rifat and Parvizi have, through their lawyers, denied any wrongdoing. Reuters attempts to reach the other men were unsuccessful. Moore, Deutsche, Exane and Novum declined to comment on the future employment of the men.