The FCA is investigating potential insider trading as a result of a spike in Friends Life’s share price before the merger between Aviva and the life and pension provider last year, according to the Financial Times.
The £5.6bn merger between Friends Life and Aviva was approved in April and led to the loss of 1,500 jobs as part of £225m cuts by the end of 2017.
The FT report stated that the regulator’s interest has been piqued by a rise of approximately 17 per cent in Friends Life’s share price days before the deal was leaked to the press on 21 November 2014.
Before the spike, which took the share price to approximately 380bps by December, Friends Life’s share price had fallen 14 per cent since the start of 2014, trading in a range between 290bps and 310bps during September and October.
Following the leak to the press, Friends Life suspended a £317m share buyback programme, which had started in July and was being funded by the sale of Lombard.
The regulator has asked the investment banks and law firms advising on the deal to hand over their records, and to disclose whether they had any contact with anyone to discuss the merger ahead of its announcement.
When asked whether it was conducting an investigation under s166 (Reports by Skilled Persons), of the Financial Services & Markets Act, the FCA declined to comment, but it is understood the FCA will look at who was on insider lists and the brokers who handled any suspicious trades.
Matt Preston, an analyst with Berenberg, said: “It is difficult to say from this side of the wall whether any insider trading took place.
“Clearly the regulator is having a look at it, but whether it will come to anything is difficult to say.”
According to figures released in the FCA’s annual report in July, insider trading is becoming increasingly rare.
The report said: “For the four years prior to 2009, the market cleanliness statistic for takeover announcements remained close to 30 per cent.
“From 2010 onwards, we saw a significant decline to an average of 13.88 per cent across 2014.”
Right to reply
Friends Life was advised by Barclays, Goldman Sachs and Linklaters while Aviva was advised by JPMorgan, Morgan Stanley and Allen & Overy. None were willing to comment.