The campaign by the Financial Services Authority (FSA) to clean up the City entered an aggressive new phase yesterday with the arrest of eight people suspected of running an insider-trading ring.

A sub-contractor at JPMorgan Cazenove, the investment bank, and a junior member of support staff at UBS, the Swiss bank, were two of the eight arrested, it was confirmed last night.

The regulator’s largest criminal operation to date involved 40 of its staff and officers from the City of London Police. The task force arrested eight men, aged between 27 and 48, and executed search warrants at sites across London and the South East in what the FSA called an ongoing inquiry. “This is a major investigation for the FSA,” a spokeswoman for the regulator said.

Last night the men were being questioned by police and staff from the FSA’s enforcement unit. Lawyers said that the simultaneous arrests and use of search warrants suggested that the suspects were an organised group and that the FSA felt that destruction of evidence was a risk.

A Cazenove spokeswoman told The Times: “We can confirm that a sub- contractor in a support services function was one of the eight arrested.” The individual concerned was not employed by Cazenove but by a company contracted to Cazenove, the Queen’s stockbroker.

UBS confirmed: “We can confirm that a junior member of UBS’s support staff in London has been arrested and has been suspended from work while the FSA carries out its investigation.”

The raids come after a recent flurry of activity from the FSA, which has previously received strong criticism for being reluctant to use its powers of criminal prosecution.

The regulator currently has three criminal prosecutions under way, including a case against Malcolm Calvert, a former Cazenove partner accused of trading on inside information after he retired from the stockbroker. Mr Calvert, 63, from Cobham, Surrey, has indicated that he will plead not guilty to 12 counts of insider dealing.

On Monday the regulator charged Matthew Uberoi and Neel Uberoi with 17 counts of insider dealing in an indictment filed at the City of Westminster Magistrates’ Court.

The FSA has accused the pair, who are related, of exploiting inside information to trade thousands of shares in NeuTec Pharma and Gulf Keystone Petroleum over four months in 2006.

Simon Morris, a partner in CMS Cameron McKenna, the law firm, said the FSA needed to achieve a conviction for its assault on insider trading to be taken seriously. “FSA has cried wolf too often on enforcement matters and the market will be watching closely for concrete results,” he said.

FSA officials told Parliament in May that powers to strike plea bargains with offenders — similar to those used by US regulators — would form part of a “bold and more resolute” approach to enforcement.

Until earlier this year, the regulator had not brought any criminal prosecutions for insider dealing since acquiring the power to do so in 2001.

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