Insider dealing and market abuse

All the latest from the market’s leading industry body for the global hedge fund industry.

The Alternative Investment Management Association, the leading industry body for the global hedge fund industry, released at the end of last year its latest Market Ethics Guidance Note to members.

The Market Ethics Guidance Note is aimed at front office, legal and compliance professionals in hedge fund management companies, and is an updated version of the Market Ethics Guidance Note published in October 2007. It sets out by way of a number of scenarios commonly encountered by hedge funds how staff should operate in order to avoid market abuse and insider dealing risks.

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 Financial Services Authority (FSA) and other European regulators of how hedge fund managers use the information they acquire in the course of business activity.

The guidance note was developed by AIMA’s Market Ethics Working Group, which was formed in February 2007 to help AIMA’s members better understand the applicable rules in this area, which are complex and open to interpretation. The group comprises representatives from AIMA member firms and some of the leading law firms advising on market abuse and insider dealing issues.

In tandem with the Market Ethics Working Group, AIMA’s Hedge Fund Training Programme for hedge fund managers has been overwhelmingly successful. Over 350 hedge fund professionals have registered on the programme since its launch in January 2008.

Andrew Baker, Deputy Chief Executive of AIMA, commented: “AIMA fully supports the FSA’s work in the area of market abuse and insider dealing. Our Hedge Fund Training Programme was developed in direct response to concerns highlighted by the FSA in its Market Watch last year, and AIMA has been working actively to increase our members’ understanding and awareness of the relevant regulations. The latest Market Ethics Guidance Note is further demonstration of the value AIMA places on ensuring high industry standards.”

Leadership changes
At the end of last year AIMA announced the appointment of Mr Todd Groome – formerly of the International Monetary Fund – as its non-Executive Chairman together with the restructuring of its Executive team.

Groome, formerly Advisor, Monetary and Capital Markets Department, of the International Monetary Fund, joined AIMA as non-Executive Chairman with effect from 1 January 2009.

Groome has been responsible for multilateral surveillance activities and review of capital markets issues, focusing on structural issues, with a leading role on financial stability analysis and considerations for the IMF, including production of the Fund’s Global Financial Stability Report. Prior to this role, he has held senior positions at institutions in London, New York and Washington, DC including Deutsche Bank, Merrill Lynch and law firm Hogan & Hartson.

He enjoys a notable and exemplary reputation as an astute commentator and influence on the world’s financial markets, as well as the broad range of relationships that he enjoys with policymakers and other authorities around the world. He brings a wealth of knowledge and strategic abilities, which will enhance greatly AIMA’s existing dialogue with national, international and supranational organisations.

Groome comments: “I am very honored to have been invited to assume this role and contribute to the important work at AIMA. It is an important period for the hedge fund industry regarding the regulatory and policy framework, and the industry’s role as a mature and significant market participant. I very much look forward to working with Andrew, Florence and the other AIMA professionals, as well as the Council members and our counterparts at the Managed Funds Association and the Hedge Fund Standards Board. I wish to acknowledge and thank Christopher, who has provided very professional and important leadership at AIMA during the past six years as Chairman, and I very much look forward to working with him going forward.”

Andrew Baker is appointed to Chief Executive Officer of AIMA while Florence Lombard is appointed Executive Director to take on a new, international advocacy role for the industry.
In light of the market crisis and the impact this has had on the hedge fund industry, AIMA announced in October its intention to focus its resources more heavily on engaging with policymakers and regulatory authorities. This redefining of roles enables Lombard to focus her attention more fully on the pressing needs of policymakers around the world and to actively promote the industry’s position and concerns with governments and policy advisers internationally. She will continue with her responsibility for Asia-Pacific activities.

Baker will take over the running of the Association, will continue to hold responsibility for the Americas and EMEA activities of AIMA, and will complement Mrs. Lombard’s policy activities – particularly in the UK. He also retains his ownership of all of the Association’s ongoing sound practices initiatives.

Christopher Fawcett, AIMA’s outgoing Chairman of six years and continuing as a Council member, commented: “The hedge fund industry has found itself the scapegoat for many aspects of the market crisis. These opinions are often not fully informed. By making this commitment to secure and direct these most senior resources to engage with governments, regulators, investors, the media and the public, AIMA and its members are stating clearly their assertion that hedge funds are significant and responsible market participants within the financial system, that their benefits are numerous, positive and meaningful, and that they stand ready to participate in the revision and improvement of the world’s market regulation in a material and sophisticated manner.

We are delighted to have secured a Chairman of Todd’s calibre. I look forward to working with Todd as a continuing Member of the Council and offer him my fullest endorsement and support.”

Florence Lombard commented: “AIMA and its members express their most sincere gratitude to Christopher for the invaluable work he has done on the industry’s behalf during his six year tenure. He has demonstrated great leadership and commitment to our members and has proven to be a great ambassador for the industry.”