This is a key decision for the FSA. There has been concern for some time within the FSA’s Markets Division about what the FSA perceives to be certain “informational advantages” enjoyed by hedge funds in particular and whether information imparted in the context of informal pre-soundings by listed companies, for example, is being used in an abusive way. 



This Decision Notice puts down a clear marker to the industry about the FSA’s expectations of market practitioners in a pre-sounding context. These include seeking advice from the firm’s legal or compliance function before dealing, following communications of this nature. 



Mr Einhorn’s failure to seek guidance from his compliance people before dealing seems to have been particularly damaging to his defence. It should also be noted from this decision that, even if an investor has refused to be wall-crossed, this will offer him no protection where, taking the context of the pre-sounding as a whole, the FSA considers that inside information has been imparted to him and he has traded in reliance on it.