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A former partner at Cazenove was convicted of insider dealing yesterday after making more than £100,000 profit from trading ahead of three takeovers.

Malcolm Calvert, 65, sat motionless in the dock at the Southwark Crown Court as a jury returned guilty verdicts on five counts of insider dealing and acquitted him of a further seven. He was released on conditional bail yesterday and faces up to seven years imprisonment when he is sentenced today.

The former market-maker obtained confidential information about upcoming takeovers and instructed a friend, Bertie Hatcher, to buy shares. Once the deals were announced, the share values soared and Mr Hatcher sold them, netting a £104,000 profit. Calvert’s share of the proceeds was passed to him in an envelope of cash left with a racecourse bookmaker.

Mr Hatcher spent £502,143 on shares in Vernalis, Johnston Group and South Staffordshire, selling them for £606,026. Calvert was cleared of insider dealing relating to Mr Hatcher’s share purchases in HP Bulmer, Macdonald Hotels and RAC.

Calvert retired from Cazenove, now part of JP Morgan, in 2000 after a 39-year career. The conviction is doubly embarrassing for the firm because the prosecution claimed that Calvert had received his information from a source within Cazenove, which advised on all three deals. The source, who was said to have received a third of the profits, was never identified, but prosecutors told the court the leaks came from someone connected to the Cazenove Commitments Committee, a group of the most senior bankers who monitor all deals the bank is advising on.

Calvert enlisted Mr Hatcher because he felt that, as a former partner of the bank, he was “too close to the action”. Mr Hatcher agreed to testify against Calvert and pay a £56,000 fine in return for immunity from prosecution. He subsequently developed dementia and never gave evidence.

A Cazenove spokesman said: “There were never any charges brought against Cazenove and no breach of systems and controls was identified.”

Calvert’s conviction is the third insider dealing victory for the Financial Services Authority, which has two further prosecutions pending and is promising more. Margaret Cole, director of enforcement and financial crime at the FSA, said: “This is another milestone in our fight against market abuse. It’s a misconception that insider dealing is a victimless crime: it damages the very confidence and trust our markets operate on and it must be stopped.”

She added that Mr Hatcher had profited from illicit trades using information, so had received a significant fine, but the FSA had been mindful of the need to encourage others to come forward. “That is why we made an agreement with him.”

He loved high-risk bets: with these he won the cash, but lost his reputation

Analysis by Ian King and Michael Herman

Contrary to popular belief, Malcolm Calvert was never nicknamed Streaky in the City because of his prowess or luck in betting.

The name in fact dates back to 1961, when he joined Cazenove as a 16-year-old school-leaver as a “blue-button” on the floor of the old Stock Exchange.

This was an environment in which everyone had a nickname. A broker with a bald head who was always smiling was called Moonbeam; another, famous for his skill in moving in and out of stocks quickly, was The Snake; Calvert, thin as a rasher of bacon and lightning fast across the exchange floor, quickly became Streaky.

By all accounts something of a “jack the lad” in his younger days, Calvert was the first dealer to become a partner at Cazenove, where he was revered. He was employed at the Queen’s stockbroker for almost 40 years, retiring in April 2000 with a reputation for being both popular and a professional.

In his time at Caz — as the firm is known throughout the Square Mile — Calvert became established as a huge racing fan and a ferocious punter. A familiar face on the racecourses and co-owner in the early 1980s of a racehorse called Lord Kintyre, he fell in with Bertie Hatcher, the owner of a chain of betting shops and insurance brokers.

He also dabbled in shares, admitting to the FSA that he sometimes put “15 or 20 grand” on stocks which he knew to be “high risk”, while deprecating his investment expertise as “crap”.

According to the FSA, Calvert told Mr Hatcher in the spring of 2003 that he had a good source of share tips. However, because he was receiving a pension from Cazenove, he was in an “awkward position” with regard to buying shares. The pair agreed that Calvert would pass information to Mr Hatcher, who would make investments on his behalf and keep a third of the profits. Calvert took the rest.

The men swung into action on June 24 and 26, when, at Calvert’s instigation, Mr Hatcher bought 70,000 shares in Vernalis. Days later the pharmaceuticals group announced a merger with British Biotech, sending its shares up and allowing the pair to sell out with a £7,588 profit. Other coups followed Calvert’s conviction is a triumph for the Financial Services Authority, the chief City watchdog, which has been seeking a big scalp for insider dealing. Although five people have been convicted over the past 12 months, none had as high a profile as Calvert.

The FSA assumed responsibility for policing insider dealing in 2001, but did not bring any criminal prosecutions until last year. The offence covers both those with the inside information and those who trade on the basis of it.

Until the 1950s, the buying and selling of shares on the basis of information known only to company directors and their advisers was considered legitimate. It was not until 1973 that the London Stock Exchange called for criminal sanctions. The first person convicted of the offence was Geoffrey Collier, a former Morgan Grenfell banker, who was given a one-year suspended sentence and £25,000 fine in 1987 after admitting using confidential information to buy shares in AE Engineering ahead of a takeover bid.

The first person to be jailed for insider dealing was Ivor Goodman, the former chairman of Uni Group, who dumped his £1.2 million holding in the company shortly before a profit warning in 1991. There were only a handful of other prosecutions before the FSA began its series of prosecutions last year — partly because the offence is so difficult to prove.

For an insider to be guilty, the jury must be convinced that they were in possession of price-sensitive information, that they knew it was inside information and that they used that information to encourage an accomplice to deal. For the dealer to be convicted, the jury must be convinced that when they traded they were acting because of a specific tip and that they knew the tip came from an inside source.

In Mr Calvert’s case, the dealer was not prosecuted because of an immunity deal struck with Mr Hatcher.