UK traders' cell-phone calls may be taped under new plan

Traders’ mobile-telephone calls may be taped in an effort to stamp out insider trading under rules scheduled to be published by the UK financial regulator as soon as this week.

The Financial Services Authority (FSA) has said cell phones used for business shouldn’t be exempt from rules requiring banks and brokerages to record employees’ calls so that they can be listened to later. In March, the agency said in draft proposals that around 22,000 phones would be covered.

“People that wouldn’t have complied anyway will find ways around the new regulations,” said Ian Mason, a partner at Baker & McKenzie in London. “Your committed insider dealer is going to find ways around that,” by using personal phones or meeting in bars, he said.

The US insider-trading case against Galleon Group LLC’s chief executive officer, Raj Rajaratnam, was brought using evidence in part from mobile-phone conversations the government got permission to wiretap. The FSA is increasing efforts to prosecute insider trading after criticism from lawmakers that it wasn’t doing enough to prevent the crime.

The regulator in September warned companies to prevent leaks to the media as part of its effort to crack down on market abuse. The FSA started to cold-call traders to interview them under caution two years ago about possible insider trading, a strategy that fell prey to hoax calls.