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AIMA issues guidance on avoiding market abuse and insider dealing risks

Date: Thursday, November 20, 2008
Author: Hedge Funds Review.com

The Alternative Investment Management Association (AIMA) has released its latest Market Ethics Guidance Note aimed at front office, legal and compliance professionals in hedge fund management companies. The note sets how staff should operate in order to avoid market abuse and insider dealing risks. It is an updated version of the Market Ethics Guidance Note published in October 2007.

The expansion by European hedge fund managers into business areas such as secondary market loan trading, private equity-style investing and shareholder activism has resulted in increased scrutiny from the UK Financial Services Authority (FSA) and other European regulators of how hedge fund managers use the information they acquire.

"AIMA fully supports the FSA's work in the area of market abuse and insider dealing," said AIMA deputy chief executive Andrew Baker. "AIMA has been working actively to increase our members' understanding and awareness of the relevant regulations."

The UK Financial Services Authority (FSA) recently published details (Market Watch 30) of the findings of its work on market rumours. It has also set out the regulatory requirements for UK trading platforms and intermediaries wishing to offer sponsored access and how the market abuse regime covers credit default swaps.

Market Watch 30 offers regulated company practical suggestions on good practice to adopt and those to avoid, which will help combat market abuse in this area, according to a statement by the FSA. Spreading false or misleading rumours about companies, particularly in volatile or fragile market conditions, can be a very damaging form of market abuse, says the FSA.

The regulator said it will continue to pursue individual cases of rumour mongering and at the same time wants market practitioners to handle rumours properly and avoid giving credibility to false stories. "We have carried out this project to assess the policies and procedures that firms apply in dealing with rumours circulating in the market," said. Alexander Justham of the FSA's markets division.