Hedge Fund Supremo Appeals Against Insider Trading

Stephen Harris

9 February 2005

Before the Paris Court of Appeal tomorrow is a case that will fill many a London foreign exchange dealer’s eyes with tears. George Soros is appealing against his conviction of violated French insider trading rules seventeen years ago. The case first came to court in 2002, when it was ruled that Mr Soros had used confidential information in a transaction involving Societe Generale shares, and ordered him to repay €2.2 million. The “illegal” transaction involved a share purchase made by Soros' Quantum Fund following a concert party approach in September 1988 by financier Georges Pebereau. Mr Soros refused to get involved but the Quantum Fund bought $50 million in SG shares soon after. Although the bidders built up a nine per cent stake in the bank, the takeover bid collapsed as a result of soaring SG share prices and the refusal of the bank's board to cooperate. The Quantum Fund, according to reports, sold its stake in November of that year. In the original case the judge agreed with the prosecution who argued that Quantum acted with insider knowledge when buying the shares. Mr Soros repost is that it was well known in Paris financial circles that Perbereau was seeking other investors, and that Societe Generale was a takeover target was the subject of media reports at the time. In a recent Bloomberg interview, Mr Soros' lawyer, Ron Soffer claimed that: "This was not insider trading. The original decision got its facts wrong and it got the law wrong." On the face of it Mr Soros seems to have been dealt with harshly by the French authorities who seem to have extended the definition of an insider well beyond established limits. Wealthbriefing shall be reporting this case with interest.