UK steps up action on insider trading with arrests

By Olesya Dmitracova and Rebekah Curtis

LONDON, July 30 (Reuters) - The arrest of eight people in an insider trading probe showed Britain's Financial Services Authority has stepped up efforts to crack down on market abuse, a crime which is notoriously hard to prove.

The financial watchdog -- long accused of not doing enough to tackle market abuse -- on Tuesday arrested eight people across London and the south-east of England in an insider dealing investigation, who were later released on bail.

"Clearly this is the FSA getting tough, getting real and showing that it does have teeth," said Howard Wheeldon, senior strategist at London-based broker BGC Partners.

"But the reality is can they make it stick? The cream is succeeding in court. The past record of success in the courts has been woeful."

Until earlier this year, the regulator had not brought any criminal prosecutions for insider dealing since acquiring the power to do so in 2001.

It had previously defined such cases as civil offences which resulted in fines. The watchdog now has three insider dealing cases before the courts, and more in the pipeline.

UBS AG (UBSN.VX: Quote, Profile, Research) said a junior member of the Swiss bank's London support staff had been arrested, while JPMorgan Cazenove -- a joint venture between the UK broker Cazenove and U.S. bank JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) -- said a subcontractor in its support function was one of the eight.

"They're small fry. The big fish are sitting out there and they're probably quite worried," said a London-based trader who requested anonymity.