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28 March 2024

London trader and wife jailed for insider dealing

Published
By Reuters

A London trader who funded a lavish lifestyle from illegal share dealing was jailed for four years - and his wife for 10 months - in an insider dealing case pursued by prosecutors on both sides of the Atlantic.

James Sanders, a director of now-defunct UK brokerage Blue Index, his wife Miranda and James Swallow, a Blue Index co-director, last month pleaded guilty to 18 counts of insider dealing between October 2006 and February 2008.

The couple - in their thirties - held hands in the dock, and when a woman in the gallery burst into tears on Miranda's sentencing, Miranda turned and smiled encouragingly at her.

The four years meted out to James Sanders constitutes the longest jail sentence for insider trading to date in the UK. Swallow was handed a 10-month jail sentence.

The Financial Services Authority (FSA), which brought the UK prosecution, said the three scooped almost 2.0 million pounds ($3.10 million) in profits from illegal share dealings, while Blue Index clients made around 10.2 million.  

A consummate trader, James Sanders told a newspaper in 2008  his mantra was: "Buy at the point of maximum fear" after snapping up a 5 million pound property in London's exclusive Kensington district for a 22 per cent discount at the height of the credit crunch.

Blue Index was a specialist brokerage of contracts for differences (CFD), a tax-efficient trade that allows dealers to speculate on short-term price fluctuations of assets such as stocks by buying a percentage of their value, or "margin".

The FSA, which worked alongside U.S. regulators and prosecutors to secure the convictions, said the insider in the case was Miranda's brother-in-law Arnold McClellan, a senior partner at the San Francisco branch of accounting firm Deloitte.

The FSA alleged that either Miranda's sister Annabel McClellan or her husband Arnold leaked privileged, price-sensitive information to the British couple about U.S. securities listed on the New York stock exchange or the technology heavy Nasdaq index.

James Sanders then disclosed information to James Swallow and encouraged Blue Index clients to trade on the basis of that inside information. That would have boosted company profits and possibly dividends and bonuses.

Annabel McClellan has already been jailed for 11 months without parole and fined $1.0 million after being pursued by the Securities and Exchange Commission (SEC), Department of Justice (DoJ) and Federal Bureau of Investigation (FBI). No charges have been brought against Arnold McClellan.