Moore Trader Rifat Made ‘Investors That Matter’ List

Date: Friday, March 26, 2010
Author: Bloomberg

Julian Rifat, the Moore Capital Management LLC employee arrested as part of the U.K.’s largest crackdown on insider trading, is a former track star who made a Morgan Stanley list of high-powered equity investors.

Rifat was an execution trader in the London office of Moore, a New York-based firm that oversees $15 billion. His job was to get the best prices for portfolio managers without telegraphing the firm’s buying and selling to rivals. He was taken into custody on his 41st birthday.

“By definition an execution trader sits near the money; he can smell the money, but he can’t touch the money,” said Jason Kennedy, chief executive officer of London-based executive- search firm Kennedy Associates.

Moore, run by Louis Moore Bacon, said on March 23 that officials from the Financial Services Authority came to its European headquarters on the top floor of One Curzon Street, in the heart of the city’s Mayfair district, with a search warrant for documents. In all, seven men were arrested after 16 addresses were raided in London and south-east England by the FSA, which didn’t release names or details of those picked up.

“We understand from the FSA that the investigation concerns possible insider dealing and the investigation of the employee does not involve any of the funds managed by Moore Capital,” the firm said in its statement. “The employee has been placed on administrative leave pending the investigation.”

Oxford Home

Rifat couldn’t be reached at his home in Oxford or on his mobile telephone. A woman who answered the door at his address on a side street north of the university said he wasn’t available for comment. She declined to identify herself. The three-story semi-detached house is about 250 yards away from FSA Chief Executive Officer Hector Sants’s home in Oxford.

“This is a quiet kind of university road,” neighbor Stephen Glover, who helped start the U.K.’s Independent newspaper, said in an interview outside his home today. “It’s not where you expect to see dawn raids.”

Rifat is the Moore employee involved in the case, according to three people familiar with the situation. He worked for the firm for about four years across two separate stints, according to FSA records.

“It is believed that the city professionals passed inside information to traders -- either directly or via middlemen --who traded on this information and have made significant profits as a result,” the FSA said in a statement.

Front-Running

The regulator is examining whether some of those arrested engaged in the front-running of block trades, a person with direct knowledge of the case said. Toby Parker, a spokesman for the FSA, declined to comment.

A block trade is large sale of securities, normally on behalf of a corporate client. Front-running is a practice in which a trader takes a position to profit from advance knowledge of a transaction.

Former colleagues, who asked not to be named because of the nature of the case, said they doubted Rifat was involved with any impropriety and called him honest and scrupulous.

Rifat was one of three Moore employees named in a list of “15 Institutional Investors That Matter” contained in a presentation dated Nov. 10, 2009, by Morgan Stanley. The presentation, titled “Investor Targeting,” groups Rifat with Moore’s co-chief investment officer, Greg Coffey, and Paul Findley, a European equities manager at the firm.

Eyes and Ears

Mark Lake, a spokesman for Morgan Stanley in New York, had no immediate comment on the presentation, which appears on the Web site of the German Equity Forum, an event organized by Deutsche Boerse AG and KfW SME Bank for companies that are seeking equity financing.

Good execution traders have to be the eyes and ears in the market for portfolio managers and have the skill to camouflage moves by even the largest firms, said Jerome Lussan, founder of hedge-fund consultant Laven Partners in London. Trading for personal accounts is one way some of them try to build track records to eventually persuade investors to back hedge funds of their own, Lussan said.

“Almost every execution trader wants to one day be a portfolio manager,” he said.

Earlier in his career, Rifat worked at firms such as Dresdner Kleinwort Securities Ltd., where he had been head of fund sales in 2004, and Robertson Stephenson International. After leaving Moore in 2007, he worked for less than a month at Brevan Howard Asset Management LLP, Europe’s largest hedge-fund firm, and for four months at VCM Fund Management LLP, according to the FSA’s Web site. He returned to Moore in July 2008, according to the records.

Investors Stay

Investors said they were comfortable leaving their money with Moore because the inquiry appears to center on personal- account trading, not the firm’s funds, according to four clients who asked not to be identified.

They said the FSA probe appears to be different than the case involving Raj Rajaratnam, the billionaire founder of New York-based Galleon Group LLC. Rajaratnam began liquidating his $3.7 billion in hedge funds five days after his arrest on Oct. 16 by U.S. federal prosecutors on insider-trading charges. Rajaratnam has said he’s innocent of all charges.

“A lot of people invested with Galleon for Raj,” said Simon Fludgate, head of operational due diligence at Aksia LLC, a New York-based adviser to hedge-fund investors. “I don’t think many people invested with Moore for this individual.”

Rifat in 1984 set a local high-jump record by an under 17- year-old at 1.95 meters (6 feet, 5 inches), according to Andy McKenzie, a Gloucester Athletic Club official. He also holds one of the U.K.’s all-time best combined scores in the decathlon, according to Athletics Weekly, and competed in the event for Great Britain in an international meet in 1990.

‘Key-note Scalps’

“It’s of course 10 events and you’ve got to be very good at all of them,” said Paul Halford, deputy editor of the Peterborough, U.K.-based sports publication.

The FSA, the U.K.’s primary financial-markets regulator, last year was given the power to negotiate plea-bargains to help pursue insider-trading investigations similar to those its U.S. counterparts have used to crack down on the crime. Opposition Conservative lawmakers have threatened to abolish the FSA should they win this year’s election, which must be held by June.

“Not so long ago people were claiming the FSA was all talk and no action,” said David Berman, financial regulatory partner at Macfarlanes LLP, a London-based law firm. “They’ll still go for the interns and the dentists but they also want key-note scalps.”