One of the FSA's stated long-term priorities is combating market abuse. The FSA has given hedge fund managers a clear warning that they must have in place appropriate systems and controls to deal with market abuse risk.

The FSA will be carrying out checks formally to assess anti-abuse controls and procedures: falling short of the required standards is not an option as it could lead to costly intervention by the regulator and, in serious cases, enforcement action.

Key points to note

• Review key control areas and, where necessary, implement new systems and controls without delay.
• The FSA has indicated some of the key areas of control and these should be at the top of the list when reviewing antiabuse controls and procedures.
• Staff training must be regular and detailed and must relate to the firm's business, highlighting particular risk areas relevant to that business.
• Senior managers are primarily responsible for the firm's systems and controls and must implement measures to create a culture of compliance: they must not rely purely on static policies and procedures.
• Over reliance on the compliance department should be avoided. Hedge fund managers must ensure that advice and assistance received from external advisors is of the required high quality.
• Banks in particular should look to the information they provide to hedge fund managers in the course of discussions about industry trends and developments. This is considered to be a risk area in relation to which the FSA will look for formalised procedures in the future.