UPDATE 4-Schroders UK trader held in insider dealing probe

Tue Jan 22, 2013 1:11pm EST

* Trader among five arrested in latest swoop

* Schroders says employee acted alone, no impact on clients

* Five expected to be released on bail

By Kirstin Ridley and Sinead Cruise

LONDON, Jan 22 (Reuters) - British police have arrested a trader at asset manager Schroders and four other men and women in the latest swoop on suspected insider dealing as part of a regulatory crackdown on market abuse.

The Financial Services Authority (FSA) said on Tuesday two men, aged 37 and 62, and three women, aged 39, 51 and 63, were being questioned after police and prosecutors searched four properties in London and other parts of England.

The five, who have not been charged, were expected to be released on bail later on Tuesday.

The FSA's head of enforcement Tracey McDermott has vowed to continue efforts to stamp out market abuse that began in earnest under her predecessor Margaret Cole.

The watchdog, which in April will be rolled into a new body called the Financial Conduct Authority, has been criticised for a "light touch" style of regulation which was exposed as inadequate by the financial crisis and has since around 2007 pursued more individuals with criminal sanctions and levied stiffer fines.

One source familiar with the latest investigation said only one of the five arrested was a London-based financial professional. Schroders confirmed one employee had been arrested and was immediately suspended. It declined to identify him.

"The FSA has informed us that the allegations relate entirely to this individual's personal actions," a spokeswoman said. "Schroders is not subject to any investigation. There is no indication of any detrimental impact on our clients or financial results."

A second source familiar with the matter confirmed the employee worked in the investment management division of the group and not its private banking arm.

The FSA said the latest arrests were not linked to any other insider dealing investigation.

Britain's top financial regulator is prosecuting six others for insider dealing and has secured 21 convictions for the offence, which can carry a jail sentence of up to seven years.

Its highest-profile insider dealing investigation to date stems from a swoop in March 2010 that originally led to seven men being arrested, including employees of institutions such as Deutsche Bank and Moore Capital, in a series of dawn raids in an operation codenamed Tabernula.

Another three individuals were later arrested as part of the same operation, although only seven have been charged so far.

One of them - Paul Milsom, a former equities sales trader at the investment arm of Legal & General - indicated at a pre-trial hearing last week that he would plead guilty to one count of insider dealing.