Transactions: conflict management and IT under scrutiny


The Financial Services Authority (FSA) is to examine law firms' conflict management procedures and IT systems as part of a study designed to find out why insider trading is so widespread in the UK.



The move has been prompted by a 2005 FSA report that claimed insider trading may have taken place before one-third of takeover announcements in 2004.



Four large transactions have been selected for the study, and the FSA will hold discussions with the law firms, public relations advisers, printers, issuers, and debt and equity providers involved. A spokesman emphasised the review is 'to help us understand how information gets out, not with a view to enforcement'. However, he added that the FSA had not ruled out enforcement action if there was evidence of insider trading by lawyers or others.



The FSA will meet specific deal teams to ascertain how conflicts are managed and what 'wall-crossing procedures' are applied to Chinese walls. It will review the adequacy of insider lists, and consider whether firms could reduce the number of insiders on a deal. The FSA will also go through 'the chronology of deals', undertaking a 'high-level study' of IT systems and security, and reviewing hard-copy filing systems as well as a sample review of documents.



Sally Dewar, director of the FSA's markets division, said: 'There are too many leaks about these deals. We aim to increase our understanding of how information is controlled and consider ways to tighten the flow of information.'



Rachel Rothwell