Friday, October 20, 2006

Hedge Funds Put On Notice

Britain's hedge funds came under fire yesterday, from both the Financial Services Authority (FSA) and the Bank of England.

The FSA's director of Enforcement, Margaret Cole, said:

"Of particular interest to us in Enforcement is the regulator's belief that some hedge funds may be testing the boundaries of acceptable practice with respect to insider trading and market manipulation.

In addition, given their payment of significant commissions and close relations with counter-parties, they may be creating incentives for others to commit market abuse.

Characteristically, our main response has been on the surveillance side and we have recently devised metrics to measure the incidence of unusual price movements in order to see if this belief is correct

The Bank of England's deputy governor, Sir John Gieve, chimed in and warned that hedge funds would be at the centre of the next crisis in financial markets. He said that he was concerned that many funds had begun taking aggressive risks again over the past few weeks.

The message to the hedge funds is clear, "keep your noses clean" as they are now being watched very closely. Britain can do without another scandal in the financial services industry.

To read more see The Independent.

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