Now we know why London’s hedge fund managers were so eager to announce the creation of a working party to improve standards this week. Yesterday we learnt that four of their number have been fined for insider-dealing by the French stock market regulator AMF.

GLG Partners, Ferox Capital Management, Meditor Capital Management and UBS O’Connor were together hit with penalties totalling €5.5 million for trading on and profiting from inside information given to them ahead of Vivendi’s convertible bond issue announcement in 2002.

It was a third offence for GLG, which was fined £750,000 by the Financial Services Authority last year for a not dissimilar bit of cheating involving trading in shares of Sumitomo Mitsui Financial Group.

Yesterday’s fines will fuel suspicions about the overcosy relationship between some hedge funds and some investment banks, and raise concerns about the damage this does to the standing of the honest majority. Investment banks make so much from the services they provide their hedge fund clients – a business known as prime brokerage – that some may be tempted, or even pressured, to stray, or at least to turn a blind eye to questionable practices.

The case also underlines the interconnectedness of different asset classes, for example bonds and equities, and the scope for abuse in one asset class made possible by the traditional book-build method of gauging investor appetite in another.

Adding to the recipe for abuse is the multi-divisioned nature of today’s sprawling banks. The conflicts of interest can be managed. The Chinese walls can be policed. It is just very difficult to do so.

Market abuse is unlikely to be high on the agenda when the new hedge fund working group under Sir Andrew Large convenes shortly. That is a pity. Manny Roman, GLG’s co-chief executive, one of 13 senior hedge fund managers on the group, seems well placed to enlighten his committee colleagues.

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