Almost a third of large UK takeover deals show signs of possible insider trading, the Financial Services Authority (FSA) has warned.
Insider information makes trading shares a lot easier
The UK's financial regulator analysed takeover bids in 2000 and 2004 and said it had found unusual share price movements before about 29% of them.
Such movements "suggest some informed trading was going on", said an FSE spokesman.
The FSE added that the situation appeared to be getting worse.
"There was a small but statistically significant increase in informed price movements, suggesting a deterioration in market cleanliness," its report found.
The FSE said the perpetrators of the insider trading could include traders at hedge funds for investment banks, as well as third parties acting on tip-offs.
Its study also found signs of informed trading before 21.7% of potentially market-moving announcements by companies listed on the FTSE 350 index between 1998 and 2003.
The study researched a total of 1,500 announcements by FTSE 350 members.
Yet the FSE said it did not have the resources to think of starting prosecutions based on the research.
"Going back to something several years ago, unless outstanding in terms of behaviour, would not be the best use of our resources," said the spokesman.
"This [survey] is not about defining our work now, to generate extra classes, but to provide a measure of the scale of the issue."
The FSA is instead stepping up efforts to monitor current share price movements.