FSA Hands Down Record Fine To Hedge Fund

by Robert Lee, for LawAndTax-News.com, London

02 March 2006

GLG, Europe's largest hedge fund group, and one of the company's star traders have been fined by the UK's Financial Services Authority for market abuse and for violating market conduct, according to reports in the British media.

The FSA has declined to comment on the behind-closed-doors hearing by its Regulatory Decisions Committee, but reports indicate that GLG and its top trader, Philippe Jabre, have each been fined GBP750,000 (US$1.3 million) - a record for a hedge fund firm regulated by the FSA.

The two-year investigation by the FSA centred on whether Jabre traded on information given to him by Goldman Sachs ahead of a 2003 convertible bond issue by Japan's Sumitomo.

GLG, which has approximately GBP6.6 billion (US$11.5 billion) in funds under management, was found to have been "vicariously liable" for failing to monitor Jabre's activities at the time of the transactions, according to the reports.

The fine comes at a time when the FSA is increasing its scrutiny over a handful of London's largest and most influential hedge funds, fearful at the impact their trading activities may have on the wider markets. In September 2005, the FSA appointed Andrew Shrimpton, the regulator's former head of asset management, to lead a six-strong team at a new hedge fund unit which is tasked with monitoring the activities of 25 hedge funds which the regulator deems may be impacting the most on London's financial markets.

Jabre, 45, who is said to be worth some GBP200 million, has reportedly returned to his native Lebanon, raising the question of whether the FSA will be able to collect the fine.

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