In a speech to the City of London last year Hector Sants, the outgoing chief executive of the Financial Services Authority, said "people should be very frightened of the FSA". In the wake of recent high-profile moves by the watchdog to prosecute insider dealing cases, Richard Sallybanks, a partner at law firm BCL Burton Copeland, thinks you'd better take notice

It's been a busy time for the FSA's enforcement division. Hot on the heels of its successful prosecution of former Cazenove partner Malcolm Calvert in March, the watchdog announced insider dealing charges against Christian Littlewood, formerly an investment banker at Dresdner Kleinwort and then Shore Capital, and his wife Angie Littlewood. In this case the FSA has also, for the first time, successfully obtained the extradition of a third person, Helmy Omar Sa'aid, from the Comoros Islands, a French overseas territory, demonstrating its willingness to look beyond these shores to bring to account those it suspects of insider dealing.

On 23 March, in a joint operation with the Serious Organised Crime Agency, the regulator carried out dawn raids at 16 addresses and arrested six people on suspicion of being "involved in a sophisticated insider dealing ring". A seventh person was arrested on his return to the UK. The names of the majority of people and companies involved, such as Julian Rifat at the hedge fund Moore Capital; Martyn Dodgson of the corporate broking arm at Deutsche Bank; Graeme Shelley of Novum Securities stockbrokers; Clive Roberts of Exane; and Iraj Parvizi of Aria Capital, are now in the public domain following press reports of the FSA action, and prosecutions can perhaps be expected later in the year, although of course everyone is innocent until proven guilty.

The new 'get tough' regime was further demonstrated on 31 March, in a case known as Project Saturn, when the FSA charged seven individuals with insider dealing based on information allegedly obtained from two major investment banks, JP Morgan Cazenove and UBS, which is believed to have netted the individuals concerned £2.5 million. This follows well-publicised arrests in this case in July 2008 and, according to news reports, the FSA is currently seeking the extradition of an eighth individual in this case.

The failure of an appeal against a $4.25 million fine for market abuse by Winterflood and its two traders, Stephen Sotiriou and Jason Robins, at the Court of Appeal in April further demonstrates the changing landscape in the UK where public anger against financial services is driving tougher enforcement action. Ditto the recent banning of Johnny Cameron, ex-chair of global markets at RBS, who was in charge when the bank collasped. The nexus between the public, politics and the industry was illustrated once more when the FSA said it will investigate Goldman Sachs for its CDO dealings, following on from the SEC investigation in America.

With the trial of two lawyers, Michael McFall and Andrew Rimmington, and a former finance director, Andrew King, also starting in April, the FSA will be looking to build on its recent successful prosecutions in the McQuoid, Uberoi and Calvert cases. The convictions in these cases have all resulted in prison sentences. Christopher McQuoid was sentenced to eight months imprisonment in respect of a one-off transaction which netted him and his father-in-law (who received a suspended prison sentence) a profit of just under £49,000. Matthew Uberoi, an intern at a corporate broking firm at the time, and his father Neel were sentenced to 12 and 24 months respectively for a series of insider dealing trades netting £110,000. Calvert was sentenced to 21 months in prison having been found guilty of five counts of insider dealing netting a profit of £104,000. McQuoid appealed his sentence to the Court of Appeal but the approach of immediate prison sentences was robustly upheld, the Court describing insider dealing as "a species of fraud" and stating "those who involve themselves in it are criminals: no more and no less".

All of this shows the increasing confidence of the FSA in bringing criminal cases. Its recruitment of a number of experienced criminal law practitioners, including the ex-head of the CPS specialist fraud unit, reflects the approach. Although the FSA can choose to deal with insider dealing under its civil market abuse regime (which can in itself result in severe financial penalties - witness the £967,000 penalty recently imposed on the CEO of the Turkish oil exploration company Genel Enerji), it now seems clear that the watchdog's preferred approach is to prosecute. The FSA regards prison as the ultimate deterrent for rich people who might otherwise think they can afford a fine.

Further, under the Coroners and Justice Act 2009 the FSA has been given statutory powers to offer immunity from prosecution and to reach so-called co-operation agreements with defendants who are prepared to plead guilty and assist in its investigation. These provisions came into force on 6 April 2010 and the FSA will no doubt be hoping that the prospect of immunity (or a lesser sentence reflecting the co-operation) will persuade participants in insider dealing to blow the whistle before any of their co-conspirators go down this route. Previously, there was no real incentive for anyone to do so. The get tough approach is set to continue. Firms should get used to it and ensure they're watching individuals carefully.

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