Focus: Cole powered: Margaret Cole, FSA

 This is just the start. Last week two City lawyers - former McDermott Will & Emery partner Michael McFall and former Dorsey & Whitney partner Andrew Rimmington - were ­committed to stand trial at the Crown Court for insider trading.

The McFall-Rimmington case is the first of four this autumn: other individuals standing trial will include ­Malcolm Calvert; Neel and Matthew Uberoi; and Neil Rollins, all on ­various counts of insider dealing.

“They’re just rolling them out,” says one fraud defence lawyer.

McFall and Rimmington are not the first professionals to be pursued by the FSA, but the involvement of partners from prominent private practice law firms will bring the case to the wider attention of commercial lawyers. (McFall and Rimmington no longer work at their respective firms, and there is no suggestion that either firm was involved in any of the alleged illegal activity.) 
Indeed, the FSA’s criminal ­prosecution of the individuals ­highlights wider issues that are being debated across the fraud prosecution and financial regulatory community. Director of enforcement Margaret Cole has made it clear that the FSA’s hardline policy is here to stay. “We start on the basis that we’ll ­prosecute criminal conduct unless there’s a ­reason not to do so,” she declared in a speech to the Fraud ­Advisory Panel (FAP) on 10 September. “We’re ­determined to make full use of our criminal prosecution toll in the ­interests of gaining ­maximum ­deterrent effect.”

Over the past few years Cole has reorganised the enforcement ­division with visible results. The FSA’s ­recruitment campaign, which ran at the start of the year, when the worst effects of the recession were being felt, was highly effective, not least because of the attractive packages on offer. “They’re probably the highest-paid lawyers in government by a mile, with salaries with bonuses up to £150,000,” sighs one criminal lawyer.

It may not be ­comparable to ­private practice, but it has allowed the recruitment of good prosecution lawyers, such as former CPS director of the fraud division David Kirk, now chief criminal counsel at the FSA. 

The FSA’s new stance has meant that fraud lawyers are watching the agency very closely, not least because its evangelism is in contrast to the straitened pragmatism of the SFO - a pragmatism recently articulated by SFO director Richard Alderman at The Lawyer’s Fraud Prosecution and Asset-­Tracing Conference on 15 ­September. 

“They’re very different prosecuting agencies with different prosecution policies,” notes one fraud practitioner. “It creates a risk that cases will not be treated alike.”

The logical question is whether this divergence could lead to some arbitrage in fraud defence. “If you have a corporate client who’s ­uncovered something dodgy, then you have the luxury of being able to choose which to go to,” admits a fraud lawyer.

“I don’t want to sound cynical,” laments another lawyer, “but most ­businesses see fines as an overhead - they’re seen as the price of doing ­business. What really scares people is personal liability.”

That sentiment is echoed by other fraud lawyers. “Nothing gets the ­message across more than ­prosecuting professionals,” says one. 

Yet the FSA’s zeal for high-profile prosecutions is viewed sceptically by some. Roger Miles, a behavioural risk analyst at King’s College London, calls it the “historic tendency of wounded regulators to fall back on symbolic enforcements as a way of trying to rebuild some political capital.

“A Wall Street friend calls this the ‘yacht moment’, after the struggling district attorney who used to tell his staff to ‘go out and find a crim with a yacht, go cuff him in front of it, and get the picture on the front page’.

“It has some quick-win deterrent effect, but you have to weigh that against how it plays out as a longer-term strategy, which may be ­counterproductive - it makes people more defensive, more unwilling to voice any early concerns before a problem turns toxic.”

Cole would undoubtedly not agree. For the FSA catching the eye is all part of the long-term gain. “Credible deterrence is all about delivering outcomes that make a real difference to consumers and to markets,” says Cole. “It means delivering results that make people sit up and pay attention.”

So far, the McFall and Rimmington prosecution has certainly done that.