Four London Hedge Funds Facing Probe By French Stock Market Regulator

by Ulrika Lomas, for LawAndTax-News.com, Brussels

24 January 2005

According to reports in the French and international media last week, France's stock market regulator, the Autorité des Marchés Financiers (AMF), is conducting an investigation into whether four UK-based hedge funds improperly benefited from privileged information ahead of a convertible bond offering made by entertainment firm Vivendi Universal in 2002.

Under investigation, according to the Wall Street Journal, are GLG Partners, which is one of the world's largest hedge funds, O'Connor, which is the hedge-fund unit of UBS, Meditor Capital Management, and Ferox Capital Management. The AMF is additionally probing Deutsche Bank, which managed the bond offering, and two Vivendi executives.

The French market regulator is hoping to ascertain whether the hedge funds in question took unfair advantage of the knowledge that Vivendi was on the verge of launching a bond issue to short its stock.

The issue of 'pre-marketing', where investment banks discuss bond offerings with potential investors in order to gauge investor sentiment, is likely to be brought into the spotlight by the investigation, as the terms of the pre-marketing agreement reached between Deutsche Bank and the hedge funds is likely to determine whether they are found guilty of wrongdoing by the Autorité des Marchés Financiers.

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