Following the revelation that of the 266 suspicious transaction reports (STRs) received between between 1 July 2005 and 31 October 2006, 255 related to insider dealing, the Financial Services regulator explained that:

"We have started a thematic review of the controls over the handling of inside information on mergers and acquisitions (M&As) – principally public takeovers. The background to this project is our occasional paper published last March on measuring the cleanliness of the UK financial markets."

"We suggested that insider trading may have taken place before about one-third of takeover announcements in 2004. The project is being done in consultation with the Panel on Takeovers and Mergers."

"The work, which is being led by Markets Division with inputs from supervisory areas, involves looking at a small number of deals where there was a leak of information. We are holding detailed discussions with all the key parties to those deals – the advisers, lawyers, PR firms, printers, issuers, debt and equity providers. We will compare these deals with deals that did not have a leak of information."

"Also, several more generic (non-deal specific) meetings are taking place so we can get a good feel for the range of systems and controls employed across the industry. So we are talking to both the FSA-regulated and nonregulated community and are working together with the industry to address the risk issues and to enhance controls where necessary."

The FSA continued:

"We aim to increase our understanding of how information is controlled and consider ways to tighten the flow of information. We note that M&A deals are often complex and involve a large number of ‘insiders’."

"In this review we will meet specific ‘deal teams’ to go through the chronology of deals, undertaking a high level study of IT systems and security and reviewing hard-copy filing systems together with a sample review of documents. We are particularly interested in understanding how conflicts are managed and what use is made of information barriers such as Chinese walls and, related to this, wall-crossing procedures."

"A review of the adequacy of insider lists is an important part of the project, as is considering whether there are ways for a firm to reduce the number of insiders or potential insiders. More generally we are considering firms’ training programs and compliance culture."

It concluded:

"We aim to publish our findings in the Spring of 2007. We plan to include a summary of good practice examples of controls and procedures and to encourage firms involved in M&A advisory work to review their controls and to benchmark themselves and to consider what action is appropriate where standards fall short."