Hedge Fund Reader : FSA pulls up Hedge Funds for their role in insider information through a loan syndicate

Comments

October 13, 2005

FSA pulls up Hedge Funds for their role in insider information through a loan syndicate

The Financial Services Authority (FSA) the UK equivalent of SEC stated that it is reviewing to develop a link between hedge funds' ability to manage price-sensitive information and to keep this behind so-called Chinese walls. The onus of responsibility has been handled to Mr. Tom Huertas head of wholesale bank regulation. The exercise was launched by the FSA in June to focus on the dangers of insider trading and market manipulation. The FSA determined one area - the price-sensitive information obtained by hedge funds from the buying of non-public bank loans, and use of any such information illegally to trade public securities such as bonds and shares. The FSA wanted to check the link between non-public information in connection with a loan syndicate for personal gains. However, the FSA discovered that hedge funds had obtained price-sensitive information from MyTravel and Jarvis, when both companies had flirted with bankruptcy without signing confidentiality agreements, which eventually prompted lenders to sell their loans to traders and hedge funds. Reuters Reports:

But to get that information and continue to trade in public share and bond markets they must have "Chinese walls" separating their public and loan traders. The suspicion among some market participants is that some hedge funds are physically too small to achieve this, sometimes operating out of a single room.

--
Did you enjoy this post?

October 13, 2005 in Gossip & Scandal, Regulation, Strategy | Permalink