If US hedge fund traders think they have it rough with forthcoming regulation and oversight, they might want to shed a tear for their brothers and sisters in the United Kingdom. British prosecutors will have the option of wiretapping cell phones to catch insider-traders inside hedge funds and other financial operations.
Hedge fund traders and other financiers will have their mobile phone calls recorded and archived for six months under the new rules from the Financial Services Authority. Banks and other financial firms already record land-line phone calls as part of an effort to fight fraud under UK law.
The FSA also ruled that conversations related to transactions cannot be held on personal electronic communication platforms, such as private e-mail, Skype or chat accounts.
The new rule will go into affect in a year on November 14, 2011.
So far, England is the only European country to require the taping and saving of phone calls. Previously, cell phone calls were exempt due to the technological challenges.
The rule only applies to cell phones issued by the hedge funds and not personal hand-helds owned by the traders themselves. That said, the FSA has ordered hedge funds and others "to take reasonable steps to ensure that such communications do not take place on private communication equipment that firms cannot record mainly for privacy reasons."
"We expect the rules to increase the volume and quality of information available to us to use as additional evidence in insider-trading cases," FSA spokesperson Sarah Bailey told reporters. Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining Advanced Trading, he served as editor of Waters, a monthly trade journal ... View Full Bio