TWO separate investigations have been launched into the Lloyds takeover of HBOS, The Scotsman understands.
In one of the inquiries, the City watchdog is believed to be examining two cases of alleged insider dealing connected with the HBOS acquisition deal.
The Financial Services Authority (FSA) is prohibited from disclosing details of its inquiries, bu
t it has emerged that speculators netted almost £200 million in deals made just before news of the Lloyds bid broke.
And it is understood that the Takeover Panel – the independent body which looks into UK takeovers and mergers – is also investigating the banks, focusing on the delay between the deal being done and details being made public.
Under the takeover code which the panel administers, parties to a merger have to announce they are in talks "without delay".
It took HBOS and Lloyds four hours from when news of the talks appeared in the media.
The Takeover Panel refused to confirm whether it was investigating the deal. But any investigation would involve those who knew about the deal before the news broke.
These are thought to include Gordon Brown, the Prime Minister; the BBC business editor, Robert Peston; Alistair Darling, the Chancellor; and the Bank of England.
It is believed that the FSA investigation was precipitated by Standard Life.
The fund management group said at the weekend that the news that the bank was being bought by rival Lloyds "came out inappropriately".
A spokesman said: "It is important that correct procedures are followed in future and we have ensured that this message has been received by those that need to know."
A spokesman for HBOS said last night: "We take our market disclosure responsibilities very seriously. We believe that our statement was issued as expeditiously as possible.
"It is important to remember that the current volatility in bank stocks is almost unprecedented.
"The last two weeks in particular have been characterised by extraordinary developments in the UK and US banking systems, which have been impacted by this volatility in a significant way."
Details of the takeover talks between Lloyds and HBOS were reported by BBC business editor Mr Peston on Wednesday morning at 9am, sending shares soaring from their low of 88p to 215p in an hour.
In two separate trades at 8:57am and 8:58pm, two buyers acquired more than 20 million HBOS shares at 96p. In total, around 160 million shares changed hands in the moments before the takeover was announced, making a paper profit of nearly £190 million for the traders and leading to suspicion of a leak.
Mr Peston said he had told "almost nobody" about the deal prior to broadcast.
"The information was very tightly controlled internally," he said.
"As for externally, I'm assuming that these were negotiations at a very high level. We all know the Treasury, the Bank of England and the FSA knew, and so did Gordon Brown.
"Other than that, there were a few advisers – but the talks had only been going intensely for a relatively short time. So it wasn't one of those deals where hundreds of people knew about it."
Research by the FSA indicates insider dealing takes place before about a quarter of all takeovers.
But it has tried to reduce the practice and in recent months has launched a number of legal actions, predominantly at small-time dealers.
In the summer, it investigated allegations that HBOS had been subject to market manipulation by "short-sellers" who gamble on share price falls.
However, it failed to bring any prosecutions.
It is short-sellers who have been blamed by some for the downfall of HBOS.
Alex Salmond, the First Minister, attacked the "speculators and spivs" for causing the share price to crash through the floor ahead of the takeover.
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