On September 8, the UK Financial Services Authority (FSA) announced that it had reached a settlement with Steven Harrison, a former hedge fund manager, regarding an enforcement action against Mr. Harrison for market abuse.

The action concerned Mr. Harrison’s conduct on September 28, 2006 while a portfolio manager for Moore Credit Fund. He received inside information about the refinancing plans of Rhodia SA (Rhodia) and upon receipt of the information, instructed a colleague to buy 2 million Rhodia 10.50% Senior Notes due 2010. He made a profit of £44,000 on that trade.

The FSA found that Mr. Harrison’s conduct was not deliberate and that he made no direct personal profit from these activities. Since he co-operated with the FSA’s investigation he qualified for an early settlement discount on his fine,which otherwise would have been £75,000. The FSA stated that the very significant impact of the 12-month restrictions to which Mr. Harrison has agreed was taken into account in setting the penalty.

The FSA stated that this was the first case it has brought concerning the credit markets and that this sent a clear message that the FSA is determined to tackle market abuse in all the markets it regulates.

Margaret Cole, the FSA’s Director of Enforcement, commented, “This case highlights the importance of city professionals taking care to recognize 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.”