RPC said the high number of dawn raids is evidence of the FSA’s increased focus on more conspicuous and heavy handed enforcement exercises since the start of the credit crunch.
Before 2007, the FSA averaged over six dawn raids each calendar year from 2005 to 2007, increasing after the credit crunch to an average of 29 raids a year from 2008 to 2011.
Steven Francis, regulatory partner at RPC, said: “This shift in enforcement activity moves the FSA closer to the Securities and Exchange Commission (SEC) in the US, where enforcement of white collar criminal activity involves a heavy and very visible police presence.”
“Most FSA dawn raids relate to suspected insider dealing, which the FSA has been clamping down on following criticism for letting too much criminal activity continue unchecked.”
“The raids are also designed to send a very powerful message to the broader market. A lot of time, preparation and money go into every dawn raid so this is a really significant increase in activity by the FSA.”
The number of FSA raids peaked at 36 in 2010 but fell to 21 in 2011.
Francis said: “The million dollar question is whether these highly visible raids are fundamentally changing people’s behaviour and reducing insider trading, or whether the FSA’s detection techniques are becoming more effective.”
“The gain from a dawn raid needs to be significant to justify the cost. The FSA has had some significant high profile successes with its raids. Increasingly the regulator’s data retrieval techniques rival the best that exists in the private sector. I expect raid activity will remain significant.”
Tracey McDermott, acting director of enforcement and financial crime, at the FSA, said: “This refers to our determination to use all our tools, not just to prevent market abuse but also to protect consumers.”
