Some punishment. According to Opalesque, within eight months Philippe Jabre has collected $1.9bn for his new Geneva-based fund and told clients that the fund will be closed to new money, at least officially, from the beginning of June.
Yes, the sentence for being at the heart of the FSA’s most successful case of cracking down on market abuse is to bag yourself a pot of new cash, with the unfortunate downside that you are forced to leave the City and instead live within easy driving distance of Europe’s best ski resorts.
Little wonder that, as the FT reported one hedge fund manager as saying last month: “People are queueing up to do the Jabre trade…What do they have to lose? That Hector Sants doesn’t invite them to his Christmas party and they have to live in Geneva instead of London?”
Jabre was fined £750,000 last year and censured for market abuse after he was found to have traded on information related to a convertible bond issue by Japanese bank SMFG. He had been “wall-crossed”, the practice of contacting potential investors ahead of a sale to sound out interest, with those investors agreeing to keep the information imparted secret and not to trade on it.
“It is very impressive, the whole of Geneva has invested with him,” a financial professional said, according to Opalesque. Swiss paper Le Temps reported 50% of the amount came from Mr. Jabre’s previous investors – mainly Anglo-Saxons institutions – from banks (for their own accounts) and from family offices.
The fund’s soft-close, from June 1, still leaves it able to accept funds from those it chooses (long-term, high quality investors, your mates, etc), while being officially closed to new money. The fund raising for Jabre Capital Partners started in December after a non-compete agreement expired with GLG, the London hedge fund where Jabre was fund manager. By opening in Geneva, he avoided seeking FSA registration.
So, apart from the inconvenience of the publicity surrounding the case, and the loss of a small part of his substantial wealth, Mr Jabre has emerged unscathed. Clearly, the case has robbed the FSA of a major stick in its battle against insider trading: reputational damage and the ensuing flight of funds.
Evidence suggests that insider trading is pervasive, fiendishly difficult to pin down and prosecute, and of course lucrative. The odds are just not stacked in the regulator’s favour.
But the Jabre resurrection shows another thing: while the largest investment banks are good at talking the talk on insider trading, they will welcome you back with open arms as a prime broking client once you’re up and running again.
At the end of the day, talent is talent and professional investors can take their own view on risk.