France’s top financial markets regulator has fined four hedge funds, including London-based GLG Partners, one of the largest such funds in Europe, a total of €6.25 million (£4.2 million) over their roles in a 2002 convertible bond sale for media group Vivendi.

In a statement, the Autorite des Marches Financieres (AMF) said it has fined GLG Partners, UBS O’Connor and Meditor Capital Management €1.5 million each for trading on inside information.

Ferox Capital Management, another London-based fund run by former world fly-fishing champion Jeremy Herrmann, was fined €1 million for the same offence. The regulator said it cut Ferox’s fine because it did not act in a “conscious and deliberate way.”

Deutsche Bank, which underwrote the November 2002 convertible bond offering, was fined €750,000 for failing to keep adequate records of phone conversation with potential clients and destroying tapes of some sales calls.

Today’s fine is the second for GLG and Deutsche Bank from the AMF this year. In January GLG was fined €1.2 million and Deutsche €300,000 for breaking market rules on another French security sale. Its former star trader Phillipe Jabre, who has since left to set up his own fund, was also fined.

Investment banks phone customers, including hedge funds, ahead of a convertible bond or other security sale to gauge interest in the product in a process known as “book building”. Clients are forbidden from acting on this information but according to the AMF, the four hedge funds used it to trade Vivendi shares.

The official announcement of a convertible bond issue often sends share prices lower so it can be advantageous to sell ahead of the official notice.

Shares in Vivendi, which has been cleared of any wrongdoing, slumped 14 per cent in the days leading up to the $1 billion (£502 million bond offering.

All parties can appeal the AMF fines.

Separately, Bloomberg reports that hedge fund Ritchie Capital Management’s two Irish based funds have filed for bankruptcy protection after losses of more than $700 million it blamed on a co-investor's alleged fraud.

Both funds files for Chapter 11 bankruptcy yesterday in New York. The filings come two months after Ritchie sued Coventry First, another investment fund, for allegedly misleading it about co-investments.

Coventry First called the lawsuit a “cheap publicity stunt'' to divert attention away from Ritchie's own problems.

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