At the end of last month a senior compliance officer at UBS AG (“UBS“) and her financial securities trader associate were each sentenced to three years imprisonment for five offences of insider dealing, following successful criminal proceedings brought by the Financial Conduct Authority (“FCA“). Confiscation proceeding are also being pursued against both defendants.
The insider dealing and subsequent FCA investigation
Fabiana Abdel-Malek, a senior compliance officer at UBS, repeatedly accessed price-sensitive information about proposed merger and acquisition transactions, held within UBS on its compliance system, between June 2013 and June 2014.
She printed insider information from the compliance system and disclosed it to a family friend, Walid Choucair, who was a day trader of financial securities. Ms Abdel-Malek would also contact Mr Choucair while she was at the office and looking at the compliance system, in order to communicate the insider information to him.
Ms Abdel-Malek and Mr Choucair attempted to conceal their criminal activity by using ‘burner’ pay as you go mobile phones, with Ms Abdel-Malek even going to the lengths of using an unregistered Blackberry which was identical to her work-issued phone to communicate with Mr Choucair.
Mr Choucair used the insider information to purchase shares in five target companies, including Elizabeth Arden Inc. and BRE Properties Inc. When the acquisitions were made public via a press article or company announcement, the share price of the target company would surge and Mr Choucair would then close his positions, resulting in a profit of approximately £1.4 million.
The FCA began investigating the defendants four years ago and analysed telecommunications data, UBS computer records, trading data and also searched premises connected to the defendants (assisted by the National Crime Agency).
The FCA noted that Ms Abdel-Malek was “… well aware of the restrictions on disclosing inside information” and described the pair’s activities as “…insider dealing at its most venal…” as they had engaged in elaborate schemes and lies to disguise what they were doing”.
The Judge noted that Ms Abdel-Malek was akin to a ‘game keeper’ who used “… the knowledge [she] had gained from [her] employment to become an efficient and accomplished poacher…” The judge considered that although Mr Choucair had ‘corrupted’ Ms Abdel-Malek into committing the offences, Ms Abdel-Malek had “… committed a gross breach of trust which will affect the reputation of UBS and without that breach taking place [the] offences would not have happened.”
Crucially, although Ms Abdel-Malek did not make any profit from the insider dealing, the judge contended that this did not mean she should receive a lesser sentence, and there was “…no reason to make a distinction between [Mr Choucair and Ms Abdel-Malek].”
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA stated that “The FCA is determined to attack all forms of insider dealing, from opportunistic insiders to those who devise dishonest schemes…”
This is the FCA’s thirty sixth conviction for insider dealing.