In a settlement reached with the Financial Services Authority (FSA), Steven Harrison, a former hedge fund manager with Moore Capital Management, ag
In a settlement reached with the Financial Services Authority (FSA), Steven Harrison, a former hedge fund manager with Moore Capital Management, agreed not to act as a fund manager or trader for 12 months and to pay a GBP 52,500 fine.
This is the first such case the FSA has brought concerning the credit markets and sends a clear message that the FSA is determined to tackle market abuse in all the markets it regulates.
On 28 September 2006, while a portfolio manager for Moore Credit Fund, Harrison was provided with inside information about the refinancing plans of Rhodia SA (Rhodia) by Credit Suisse.
The FSA states, “Mr. Harrison accepts that he was given inside information although he failed to recognise this at the time. Upon receipt of the information, Mr. Harrison instructed a colleague to buy 2 million Rhodia 10.50% Senior Notes due 2010 (the 10.50 bonds) on that day.”
On 2 October 2006 Rhodia announced, as part of its refinancing programme, it would be calling in some of its more expensive debt, including the 10.50 bonds. In due course Moore Credit Fund tendered the 10.50 bonds that had been purchased on 28 September 2006 and made a profit of approximately EUR 44,000.
Margaret Cole, FSA Director of Enforcement, says, “This case highlights the importance of city professionals taking care to recognise inside information when they see it and not to misuse it. Hedge fund managers and people in similar roles are often legitimately provided with inside information in the course of their business. The FSA expects people entrusted with such responsibility, in the credit markets as much as in any other regulated markets, to observe high standards of conduct and not to take advantage of their privileged access to inside information. The consequences for Mr Harrison of not doing so are that he has lost the privileges of carrying on his profession as a fund manager and a trader for a period.”
The FSA found that Harrison’s conduct was not deliberate and he made no direct personal profit from these activities. He co-operated with the FSA’s investigation and has qualified for an early settlement discount on his fine which otherwise would have been GBP 75,000.
The FSA states, “The very significant impact of the restrictions which Harrison has agreed to for twelve months has been taken into account in setting the penalty.”
Earlier this year, the Financial Times revealed Moore Capital Management is spinning off its fixed-income hedge fund, which plans to grow as large as USD 3 billion after a new fundraising effort. Moore told the Financial Times that the decision to spin off the credit fund was the result of its size, making it sensible to have a dedicated risk management and operation system for it.
The London-based spin-off, James Caird Asset Management, will take Moore Capital’s Credit fund and 30 employees, led by fund manager Tim Leslie, with it. London-based Moore will have a stake in the new company, with which it hopes to have a “symbiotic relationship,” it said.
