Tuesday, 22 July 2014
Last updated 4 hours ago
Apr 18 2012 | 1:23pm ET
A Swiss hedge fund manager is fighting a huge fine—and for his career—with British regulators.
The Financial Services Authority says that Stefan Chaligné directed his brokers to buy up big blocks of seven stocks in at the end of 2007, driving up those stocks' price and his Iviron fund's performance—and performance fees—for the year. Chaligné is contesting the proposed £1.25 million fine and industry ban, saying that the market manipulation was inadvertent.
According to the FSA, which is also seeking sanctions against Chaligné's brokers, the hedge fund manager's trades during the last two minutes of trading on Dec. 31, 2007, increased Iviron's net asset value by €2.7 million for the year, earning Chaligné €360,000 in additional performance fees. Iviron had about €95 million in assets under management.
"This is quite serious and blatant market abuse," the FSA's Andrew Mitchell said.
Chaligné would not totally disagree. He has admitted that his actions at the end of 2007 and the end of January 2008 constitute market abuse. But he said there was no intent to manipulate stock prices—although in two of the seven cases, his last-minute buys accounted for 80% of those stocks' total volume for the day.
"My perception at the time was that we had some unusual circumstances and I was defending my existing positions," Chaligné, who is seeking a smaller fine, said.
The FSA alleges that Chaligné's actions were not quite so innocent. The regulator said that Chaligné ordered his brokers at Cantor Fitzgerald to "push it to the maximum" and "make it blow up for me."
"If you want to do it in the last 10 minutes, you do it in the last minute," the FSA alleges he told Cheikch Tidiane Diallo.
Diallo, who was not fined due to financial hardship, has appealed the FSA ban levied against him. Another Cantor trader, Patrick Sejean, who like Diallo was fired last year, is appealing his ban and a £600,000 fine.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…