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The Financial Services Authority has today fined hedge fund manager GLG Partners LP (GLG) and Mr Philippe Jabre, a former managing director of the firm, £750,000 each for market abuse and breaching FSA principles. This is the largest fine the FSA has issued against an individual.
On 11 February 2003 Mr Jabre was 'wall crossed' by Goldman Sachs International as part of the pre-marketing of a new issue of convertible preference shares in Sumitomo Mitsui Financial Group Inc (SMFG). Mr Jabre was given confidential information and agreed to be restricted from dealing SMFG securities until the issue was announced. Mr Jabre breached this restriction by short selling around $16 million of SMFG ordinary shares on 12-14 February 2003. When the new issue was announced on 17 February 2003, Mr Jabre made a substantial profit for the GLG Market Neutral Fund.
Margaret Cole, FSA Director of Enforcement said:
"Mr Jabre traded on information he had received as a result of the position he enjoyed as a leading hedge fund manager. The stability and fair operation of the markets through legitimate pre-marketing activities is jeopardised if those who are wall-crossed do not respect the restrictions imposed on them.
"GLG is also responsible for Mr Jabre's market abuse. Firms are accountable for the behaviour of their employees, particularly if they are at a senior level."
Decision of the Financial Services and Markets Tribunal
The FSA has issued the Final Notice to GLG and Mr Jabre after the withdrawal of Mr Jabre's reference to the Financial Services and Markets Tribunal following the Tribunal's decisions on 27 July 2006. The Tribunal ruled on two important issues raised by Mr Jabre's reference; the extent of the Tribunal's jurisdiction and the scope of the market abuse regime.
Margaret Cole said:
"These decisions provide clarification on two points of general importance to our work. The Tribunal has made it clear that it can impose a different or greater sanction than that imposed by the RDC. And the Tribunal has confirmed that it is not possible for someone with inside information on a UK traded stock to circumvent the market abuse regime by trading in that stock on an overseas market."
Background
- The full text of the Final Notice dated 1 August 2006 is available on our website. They include the background to the case, the relevant statutory provisions and regulatory requirements contravened and the factors taken into account by the RDC when setting the fines.
- The Regulatory Decision Committee issued a Decision Notice on 28 February 2006. Mr Jabre referred the matter to the Tribunal on 27 March 2006. Following the Tribunal's decisions on the two preliminary issues he had raised, Mr Jabre withdrew his reference. The FSA has therefore issued a Final Notice giving effect to the RDC's decision of 28 February 2006.
- Financial penalties are not treated as income by the FSA. They are applied for the benefit of authorised persons (or the issuers of securities admitted to the list) as appropriate, and so given back to the industry in subsequent years.
- The FSA is grateful for the assistance and co-operation it has received in this matter from the Japanese Securities and Exchange Surveillance Commission.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
- The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.
