FSA checks up on hedge funds

by Gill Montia

Story link: FSA checks up on hedge funds

The Financial Services Authority (FSA) has warned London-based hedge funds that it is dissatisfied with the level of market abuse, such as insider trading, being practiced by the sector.

As a result, the FSA is planning a series of checks on the anti-abuse measures put in place by hedge fund managers. The visits should begin in the first-quarter of 2008.

In recent months, the FSA has been disappointed with the findings of a number of informal visits that it has carried out on hedge fund managers.

The authority has reported that “Some hedge fund managers had a high level of awareness and appropriate controls in place, while others were less aware, had fewer controls and demonstrated a complacent attitude to the risks.”

The regulator is developing a series of recommendations on how to prevent market-abuse and will expect senior management to take responsibility for preventing it.

The measures could include recording telephone conversations and designating a member of staff to deal with information that could be regarded as sensitive.

No criminal cases for insider trading have been brought by the FSA since it took over responsibility for the issue, in 2001.

However a recent study into insider dealing has revealed that in 2005, almost one-quarter of formal takeover statements to the stock market were preceded by share price movements that could be described as questionable.