By Philip Hoult


The Financial Services Authority (FSA) has approached the Solicitors Regulation Authority (SRA) about possible changes to the new Solicitors Code of Conduct as part of a drive to clamp down on insider trading.



The approach follows an FSA review of public takeovers, published this week, which looked at four deals - three where there had been an unusual degree of price volatility, indicating a possible leak of inside information, and one where there was no such volatility. The FSA talked to both FSA regulated and non-FSA regulated firms involved in the deals, including six law firms.



It found that many were complacent about the robustness of their internal procedures and few had formal policies about when to consider an internal review following leakage of information. The report also said the criteria for selecting insiders on deals was insufficiently rigorous and IT controls were not strong enough.



The FSA called on firms - whether regulated by it or not - to strengthen their controls. Its markets division is drawing up a statement of good practice with a view to raising standards among non-FSA regulated firms, although the FSA has recognised that a different approach might need to be taken for solicitors handling public takeovers. Rule 4 of the code already contains guidelines covering the issue.



The FSA said: 'In order to achieve appropriate consistency, we will work together with the SRA and the City of London Law Society (CLLS) to consider how the points noted in the FSA's review should be shared with solicitors and whether any changes should be made to the SRA rules.'



CLLS chairman David McIntosh said it shared the FSA's view on the importance of confidentiality.



He added: 'The right approach is for the FSA to work together with the SRA to consider whether it is necessary to update these rules, rather than applying any statement of good practice to solicitors.'