LONDON (HedgeWorld.com)–GLG Partners, Europe’s biggest hedge fund, and one of its star traders have been fined ?750,000 ($1.3 million) each for market abuse and violating market conduct, according to a press report.
The report, in the Financial Times, said the U.K. Financial Services Administration’s regulatory decision committee found trader Philippe Jabre guilty of market abuse and violating market conduct. GLG was found guilty of the same charges for not properly monitoring Mr. Jabre.
Asked whether the hedge fund operator would appeal the FSA finding, a spokeswoman for GLG said: “They are not commenting on anything right now.” She stressed that GLG had cooperated fully with the FSA since the investigation began two years ago into a convertible bond issued in February 2003.
The firm has 28 days to contest the FSA’s decision notice. Doing so would involve filing an appeal with the Financial Services and Markets Tribunal, which operates on an open-ended time frame. Unlike the regulatory decision committee hearing, which was held behind closed doors, an appeal would be in public.
The case focused on whether Mr. Jabre traded on information given to him by Goldman Sachs on a forthcoming deal by Sumitomo Mitsui Financial Group of Japan. GLG, which has US$11 billion under management, still faces regulatory investigations by French and Spanish regulators for alleged actions relating to a number of convertible bond issues.
The ruling of the FSA’s decision committee comes at a sensitive time for the hedge fund industry. Regulators in several European states have said they will bring the industry under tighter scrutiny, while the FSA has said it will be focusing more on pursuing market abuse by hedge funds involving market distortion and using insider information. The investigation of the trading activities of GLG and Mr. Jabre is the first major case brought by the FSA involving actions by hedge funds.
One London-based hedge fund manager with a mid-sized market neutral fund observed: “We have more control and checks on what we do than anybody else. This is the type of malarkey hedge funds have to put up with.”
Privately, hedge fund industry sources say that the damage to GLG’s reputation is certain to be a greater cost than the reported GBP 1.5 million (US$2.6 million) in fines handed out. This may account for sources telling the Financial Times that Mr. Jabre, who was unavailable to comment, would leave the firm even though he was found not to have violated “Principal 1″ of the FSA’s 11 business principles. Principal 1 requires a firm and individuals to conduct business with integrity.
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