GLG Partners, the £10 billion London-based hedge fund, has been hit with its second insider trading fine from the French financial regulator in six months.

The Autorité des Marchés Financiers (AMF) fined the hedge fund €1.5 million (£1 million) – the largest penalty it could levy – for using sensitive information to trade shares in Vivendi, the French media group. The regulator also fined three other London-based hedge funds – UBS O’Connor, Meditor Capital Management and Ferox Capital Management – €4 million for the same offence relating to share trading ahead of a Vivendi bond issue.

Deutsche Bank, which arranged the $1 billion bond sale in November 2002 for Vivendi, was fined €750,000 for failing to keep adequate records of phone conversations and destroying potential evidence.

GLG, the former home of the disgraced trader Philippe Jabre, was fined €1.2 million by the AMF for a similar insider trading offence in January.

A spokesperson for the fund, one of Europe’s largest and most successful, said that it intended to appeal against both fines but declined to comment further. Meditor Capital Management said that it was also planning an appeal against the fine. UBS O’Connor, 100 per cent owned by UBS, said that it was “considering options”, while Ferox Capital Management declined to comment.

It is understood that Ferox, run by former world flyfishing champion Jeremy Hermann, is not planning an appeal. Its fine was €1 million, €500,000 less than the other three funds, because its actions were not considered to have been deliberate, the AMF said. Deutsche Bank said it was “too early to say” if it would appeal.

Yesterday’s fine followed an AMF investigation into a 14 per cent fall in Vivendi’s share price in the run-up to the convertible bond sale. The investigation, launched at Vivendi’s request, found that all four hedge funds had traded in the media group’s shares prior to the bond issue.

News of a convertible bond sale often sends a company’s shares lower. Investors with inside knowledge can lock in gains by selling at higher prices before the bond is announced. Investment banks typically phone investment funds prior to this official announcement to gauge their interest in the offering in a process known as “book building”. Hedge and other investment funds are forbidden from trading on this inside information.

GLG, based in Mayfair, is one of Europe’s most successful but controversial hedge funds. The fund and Mr Jabre, its former top trader, were each fined £750,000 by the Financial Services Authority last year.

Mr Jabre, whom the authority accused of jeopardising the “stability and fair operation” of financial markets, launched and then dropped an appeal against his penalty. He has since resurfaced at the helm of a $4 billion hedge fund that is registered in Geneva and therefore beyond the FSA’s jurisdiction.

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