CNBC Comment: UK fraud squad flounders behind US

HOLLYWOOD loves a swindler. Leonardo DiCaprio’s role as a dwarf-tossing trader in The Wolf of Wall Street proves as much, and reinforces a modern-day misrepresentation of bankers as the real gangsters of New York.

“My name is Jordan Belfort,” says DiCaprio in his opening line. “The year I turned 26, I made $49m, which really pissed me off because it was three shy of a million a week.” Belfort makes his fortune trading on the stock market, but gets addicted to sex and drugs.

After Black Monday, he begins flogging penny stocks to the richest one per cent of investors in a “pump and dump” scheme that leaves clients holding $100m (£61m) in losses. But there’s a difference between America’s take on bad-boy traders and the Brits.
Over here, financial crime regulators frequently turn out to have the prosecuting skills of sheep. Too many investigations either take too long or come to nothing, taking the wind out of improvements made by regulators.

Even forgetting the Serious Fraud Office’s botched investigation of the Tchenguiz brothers, or the Office of Fair Trading’s failed attempt to bring a price-fixing case against four British Airways executives in 2010, it’s hard not to want more progress from the Financial Conduct Authority (FCA) and its new tough-talking regime.

There is still no verdict in the Ian Hannam case – the star banker who stepped down as one of Europe’s most high profile financiers after a lengthy investigation by the regulator. He denies any wrongdoing.

Last year, three men were arrested after a year-long investigation, which was eventually dropped. But not before their hedge fund was forced to close.

There is some progress. In London, abnormal trading ahead of deals has dropped to its lowest level in a decade. And as a result of the FCA’s proactive work contacting firms, “Suspicious Transaction Reports” have risen from 509 cases in 2010 to over 1,000 last year.

Since 2009, the regulator has had 23 insider dealing convictions and 36 market abuse cases resulting in bans or fines. However, US prosecutors have won a guilty plea or conviction in every case they’ve brought so far — nearly 80.

For a Hollywood ending, the FCA needs a better hit rate in the cases it does take on. Too often, its approach is like a case of regulator crying wolf.

Helia Ebrahimi is UK business editor at CNBC. @heliaebrahimi