Wednesday, 23 July 2014
Last updated 14 hours ago
Oct 29 2007 | 2:12pm ET
British regulators are warning that hedge funds are not doing enough to combat insider trading and market abuse. Amid calls for regulation and an industry effort to set up a code of conduct, the Financial Services Authority also offers a series of recommendations that might help hedge funds keep the authorities off their backs.
The FSA wrote in its markets division newsletter that it was “disappointed by some of what we saw” in a series of visits to hedge funds and banks to investigate increasing market abuse.
“Some hedge fund managers had a high level of awareness and appropriate controls in place, whilst others were less aware, had fewer controls and demonstrated a complacent attitude to the risks,” the FSA said. And it laid responsibility for such matter squarely with top management, rather than compliance departments.
The British markets regulator said it supported hedge funds’ efforts to limit the leaking of inside information, but that much more needed to be done. In particular, the FSA called on hedge funds to make clear to employees that insider information must remain confidential, and called on managers to institute independent monitoring of their market-abuse controls. It also said that hedge fund employees must receive regular training.
“We were particularly disappointed at the level and standard of training at some of the hedge fund managers visited,” the FSA wrote. “While there are pockets of high-quality training, we found that sometimes the level of training was non-existent, low and/or poor quality.”
The regulator says it will continue its visits with hedge funds in the coming months to determine a course of action.
“We will take action in situations where we identify the deliberate leakage of information or the dissemination of rumors.”
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…