The scale may be far more modest, but the shock waves are being felt just the same. The case of Geoffrey Collier has caused as much consternation in London as that of Ivan Boesky has done in New York.

No one was naive enough to believe that insider trading didn't take place in Britain.Indeed, it only became an offense six years ago and many older members of London's financial community may still regard insider tips as fair game.

The puzzling factor is why Mr. Collier, one of the new breed of City high- flyers earning a six figure salary, should risk his whole career on a transaction that could hardly fail to be spotted.

Even if the two firms of market-makers that sold shares to Mr. Collier had not become suspicious about the timing of the order, the new electronic trading system probably would have picked up the illegal trade.

The chances of detection are much greater, now that securities firms have to input details of every transaction into the Stock Exchange computer. Once matched, information on all trades is then transferred to the surveillance database where the exchange's insider dealing team can use a computer terminal to cross-check and query any deal that may look questionable.

Until last month's Big Bang, when new trading procedures were introduced and electronic dealing began, the team of inspectors had to plow through mountains of paperwork in order to track down any suspicious dealings - and the chances of success were almost zero.

Since 1980 when insider dealing was made a criminal offense, there have only been six successful prosecutions. And yet Stock Exchange statistics show that more than 90 percent of share prices move before a takeover bid is launched, indicating that insider dealing may be rife.

In Mr. Collier's case, he placed an order for 50,000 shares in the British engineering group, AE, one Monday morning. Within half-an-hour, a takeover bid was launched for AE and the share price shot up 31 pence, providing Mr. Collier with an immediate 15,000 ($22,000) profit.

Understandably miffed at having sold the stock at too low a price and curious about the timing of such a large purchase, the two market-making firms, Scrimgeour Vickers and Chase Securities ordered an investigation. It didn't take them long to unravel what had happened.

The order was placed via the Los Angeles office of Scrimgeour Vickers who traced it back to an offshore company in the Cayman Islands, which had been used in the past to buy shares for a certain Mr. Collier who had once worked in the New York office of Vickers da Costa (now part of Scrimgeour Vickers). The very same Mr. Collier was known to be head of securities at Morgan Grenfell, the merchant bank advising the company that was hoping to buy AE.

Mr. Collier resigned from Morgan Grenfell two weeks ago, but reverberations

from the case will continue for many months. He is now cooperating with both British and U.S. inspectors who are investigating the incident and looking into other transactions made through the same Cayman Islands company.

There is no evidence that any Chinese walls were breached within Morgan Grenfell, and that Mr. Collier passed on details of the planned takeover bid to the firm's securities dealers to enable them to trade on the information.

But if such a highly respected employee at one of London's most prestigious investment houses has been trading illegally for his own account, how widespread is the practice throughout the City of London, critics want to know.

The Collier case certainly sent alarm bells through government circles, prompting the Secretary of State for Trade and Industry to bring in new laws on insider trading several months ahead of schedule. Inspectors now have far greater powers to investigate alleged insider dealing cases, and can compel witnesses to submit to cross-examination and produce documents.

Until now, London's securities market has effectively policed itself, assuming that the club-like atmosphere of the Stock Exchange and the automatic checks and balances of the single capacity system whereby a firm could not undertake both broking and market-making functions, were sufficient to make market members toe the line.

With Big Bang and the emergence of huge new financial conglomerates, all that has changed. Furthermore, incidents of large-scale fraud uncovered in the Lloyd's insurance market in recent years proved that self-regulation is not enough - indeed critics claim that self-regulation facilitates cover-ups with members unwilling to expose their colleagues to public scandal.

New investor protection laws will be on the statute book within a couple of months. Although the practice of self-regulation is being preserved, a new statutory body, the Securities and Investment Board, is being set up to oversee all investment markets.

Labour Members of Parliament believe the events of the past fortnight in London and New York prove that still tougher regulations are needed, and that the government should have set up a body more akin to the Securities and Exchange Commission.

Bryan Gould, the Labour Party's Treasury spokesman, says that where he quarrels with the government "is in their reluctance to apply to the City the same rigorous standards, which are applied elsewhere."

"It is in no one's interest that the City should acquire a reputation for being soft on fraud," he added.

City officials, who vociferously oppose any SEC-type organization, are drawing comfort from the fact that stiff competition between investment houses will force them to be alert to any questionable transactions and to resist any attempts at a cover up. Furthermore, the move away from the Stock Exchange floor to electronic dealing has made the whole process less personal and therefore less clubby.

The discovery of Mr. Collier's activities was a dreadful start for Big Bang, just when the eyes of the world were focused on London's new-style securities market. All the government can do now is hope that the fate of Mr. Collier, who could go to jail, will act as a warning to all the other highly paid City dealers that crime does not pay, and that they stand far less chance of getting away with fraud now than they did prior to the introduction of electronic trading.

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