Suspicious trading activity appeared ahead of more than four in 10 UK takeover announcements last year, the highest proportion recorded by the Financial Conduct Authority and a fresh warning sign for the integrity of Britain’s dealmaking market.

The FCA’s market-cleanliness statistic rose to 41.1% in 2025 from 37.8% in 2024, according to data released alongside the regulator’s annual reporting package on July 9. The latest reading was also substantially above the five-year moving average of 33.74%, indicating that unusual pre-announcement price behavior has become more prevalent than the recent historical norm.

The measure tracks the proportion of takeover targets whose shares register a statistically significant positive abnormal return during the two trading days before the first announcement of an offer or possible offer. Because takeover bids frequently include a premium to the target company’s prevailing share price, investors with advance knowledge can potentially earn substantial gains by buying shares before the information becomes public.

The result does not establish that insider dealing occurred in 41.1% of transactions. The FCA describes the statistic as one signal of possible misconduct rather than a finding against any company, adviser or investor. Share prices can rise before an announcement because analysts identify an undervalued target, journalists report credible market intelligence, investors anticipate sector consolidation or broader market conditions lift the stock independently of the transaction.

The regulator also noted that its measure captures only positive abnormal price movement during a narrow two-day window. Insider trading that occurs earlier, takes place through derivatives without producing an immediate visible price effect, or involves strategies designed to conceal the direction of the trade may not be reflected. Conversely, some legitimate trading may be flagged because it happens to coincide with confidential negotiations.

Even with those limitations, the scale and direction of the change are likely to concern regulators and compliance teams. The 2025 reading was 3.3 percentage points above the previous year and more than seven percentage points above the five-year average. It follows repeated warnings from the FCA about strategic leaks, weak information controls and the handling of confidential takeover discussions by issuers and professional advisers.

The rise was not confined to mergers and acquisitions. The FCA’s abnormal trading volume measure, which examines equity and certain equity-derivative trading before potentially price-sensitive company announcements, increased to 8.1% in 2025 from 5.6% in 2024. The regulator identified abnormal volume increases in 154 of 1,898 announcements, compared with 89 of 1,585 announcements a year earlier.

That broader measure covers a wider range of disclosures than takeovers, potentially including earnings updates, profit warnings, capital raisings, major contracts and other events capable of moving a listed company’s valuation. As with the takeover statistic, an unusual increase in volume does not by itself demonstrate market abuse. It does, however, give the FCA a screening tool for identifying transactions that may require closer analysis of accounts, counterparties, communications and beneficial ownership.

The regulator said elevated global economic and geopolitical volatility may have contributed to the increase in signals. When markets are moving rapidly, individual securities can experience larger price changes and heavier volumes even without confidential information entering the market. The FCA has therefore cautioned against interpreting the statistics as a direct count of unlawful trades.

For takeover transactions, however, the risk of information leakage is structurally high. A significant acquisition can involve directors, senior executives, investment bankers, lawyers, accountants, public-relations advisers, financing providers, consultants and due-diligence specialists across multiple jurisdictions. Each additional participant expands the number of people who may know the target’s identity, indicative valuation, financing terms or expected announcement timetable.

Cross-border transactions can create further complications when bidders, advisers or financing counterparties operate under different market conventions and information-security practices. Private-equity bids may also require contact with lending banks, debt investors and potential co-investors before a public announcement, increasing the number of access points through which sensitive information must be controlled.

The FCA has previously said it observed an increase in cases where material information about live mergers and acquisitions appeared to have been deliberately leaked to the media. In Primary Market Bulletin 54, published in March 2025, it cited examples including confidential discussions between an offeree board and a potential bidder, rejected approaches and expectations of an improved offer.

The regulator warned that both deliberate strategic leaks and careless hints can constitute unlawful disclosure when the information qualifies as inside information under the UK Market Abuse Regulation. It also rejected the idea that written policies alone are sufficient, arguing that firms need a culture and working practices that actively discourage the selective release of transaction information.

Under the UK takeover framework, people who receive confidential, price-sensitive information before an offer announcement are expected to treat it as secret and share it only when necessary. Issuers and advisers are also expected to minimize the risk of leaks and to be prepared to respond rapidly if rumors or unusual price movements indicate that confidentiality has been lost.

For investment banks and law firms, the latest figures are likely to reinforce efforts to reduce the number of employees with access to live deal information. Controls can include project-specific code names, restricted digital workspaces, tighter printing and download permissions, monitored communications, documented wall-crossing procedures and prompt removal of access when a person’s involvement ends.

Firms may also review whether compliance, risk, finance and senior-management personnel are receiving transaction details earlier or more broadly than required. Large institutions often need oversight from several control functions, but excessive internal distribution can undermine the effectiveness of insider lists and make it more difficult to identify the source of a leak.

Transaction surveillance is another area likely to receive increased attention. Brokerages, investment banks and trading venues are required to maintain systems capable of identifying suspicious transactions and orders. Effective monitoring must account not only for direct share purchases but also for options, contracts for difference, spread bets and other instruments that can provide leveraged exposure to a takeover target.

The FCA said in its 2025/26 annual report that automated tools had improved the quality of alerts used to detect insider dealing and extended surveillance across a wider range of activity. The regulator also reported that it had expanded alert coverage and was developing additional monitoring tools as part of a broader shift toward earlier, data-led intervention.

Enforcement outcomes provide another measure of the FCA’s response. During the year ended March 31, 2026, the regulator secured four insider-dealing convictions. Two of those convictions resulted in sentences totaling 11 years, which the FCA described as record prison terms. It also fined 12 individuals a combined £1.77 million for insider dealing, market manipulation and misleading statements.

Separately, firms were fined approximately £14.4 million for failures involving transaction reporting, control weaknesses and inaccurate published information. The regulator opened two new investigations under the UK Listing Rules, conducted nine market-abuse supervisory visits and used tools including skilled-person reviews and voluntary restrictions on risky activity.

Those figures demonstrate that the FCA is combining criminal prosecutions with civil enforcement and supervisory intervention. Criminal insider-dealing cases can be difficult and time-consuming because prosecutors must establish the possession and misuse of inside information to the required evidential standard. Surveillance data may identify a suspicious pattern, but investigators still need to connect trading decisions to confidential information and specific individuals.

The market-cleanliness statistic therefore functions principally as a system-level indicator. A sustained rise can highlight weaknesses in the way the financial sector protects sensitive information even when individual signals do not result in enforcement. It can also help the regulator assess whether previous warnings, supervisory visits and improvements in firms’ controls are producing measurable changes.

For listed companies, the data may lead boards to demand more detailed assurances from advisers before launching a strategic review or entering takeover discussions. Directors may seek clearer explanations of who will be added to insider lists, how potential conflicts are managed, where documents will be stored and how communications with investors, lenders and the media will be controlled.

Bidders may face similar pressure, particularly when they are based overseas or assembling complex financing packages. UK advisers are likely to emphasize that premature disclosure can create legal exposure, disrupt negotiations and force an earlier announcement than the parties intended. A leak can also move the target’s share price, increase the acquisition cost and reduce the bidder’s ability to negotiate privately.

Institutional investors have a parallel interest in clean markets. Takeover speculation can create substantial gains and losses, and investors that follow information barriers may be disadvantaged when others trade on improperly disclosed details. Persistent pre-announcement price movement can reduce confidence that all market participants are receiving material information at the same time.

That confidence is especially important as policymakers seek to strengthen London’s position as a global financial center and encourage more investment in UK-listed companies. Market integrity is closely connected to liquidity, valuation and the cost of capital. Investors may demand a higher risk premium when they believe information advantages are widespread or enforcement is unlikely to be effective.

The findings also create a policy tension for the FCA. The regulator is under pressure to support competitiveness and reduce unnecessary burdens on financial firms while continuing to police misconduct. More extensive monitoring, recordkeeping and access restrictions can increase costs for banks, brokers and corporate advisers, but weak controls can impose wider costs by undermining trust in public markets.

The FCA has presented data analytics and more targeted supervision as a way to reconcile those objectives. Rather than relying solely on broad compliance requirements, the regulator is increasingly using transaction reports, behavioral indicators and network analysis to identify higher-risk activity. That approach may allow it to direct investigative resources toward the most significant patterns while reducing unnecessary intervention elsewhere.

The 41.1% figure should therefore be read as a warning rather than a verdict on the UK takeover market. Volatility, informed speculation and the methodology’s narrow event window complicate any direct conclusion about the prevalence of insider dealing. The increase nevertheless places renewed responsibility on issuers, advisers and trading firms to demonstrate that confidential information is being protected and suspicious activity is being identified quickly.

Future readings will show whether the record level was partly a product of an unusually volatile year or evidence of a more persistent deterioration in market cleanliness. In the meantime, the combination of rising takeover-related price signals, higher abnormal trading volumes and the FCA’s earlier warnings about strategic leaks is likely to keep transaction confidentiality near the top of the compliance agenda across Britain’s capital-markets industry.