An investigation by the chief City watchdog has failed to uncover evidence of irregular share dealings in London ahead of the September 11 terrorist attacks on New York and Washington.
Sir Howard Davies, chairman of the Financial Services Authority, said yesterday there had been no insider trading in the days before the attacks. He was giving evidence to the Treasury Select Committee.
He added that some short-selling transactions in the days leading up to the attack "looked a little odd" but there were plausible reasons for these trades.
In the aftermath of the terrorist attacks Britain, Europe and America launched investigations into short-selling of shares in insurance companies, airlines and aerospace manufacturers. However, these inquiries have failed to establish any connection with Osama bin Laden's al-Qaeda terrorist organisation.
A separate preliminary report presented yesterday by Didier Reynders, the Belgian Finance Minister, also concluded there was no evidence of market abuse by terrorists in any of the European countries.
Sir Howard informed MPs that there had been a significant increase in the number of reports referred to the National Criminal Intelligence Service (NCIS) on suspicious transactions from financial institutions operating in the UK. But he said he did not know whether these had produced clear evidence of criminal activity.
He emphasised that London achieved a higher rating from the international Financial Action Task Force, which focuses on combating money laundering, for its financial health than New York. Sir Howard said regulators were prepared to take a tough line with institutions found to be colluding in aggressive short-selling with the aim of driving down share prices to pick up cheap stock.