Under fire Jabre steps down as director of GLG

Filings with Companies House show Mr Jabre left the GLG board last month, at about the time he appeared before the Financial Services Authority's Regulatory Decisions Committee.

The $1.5bn (£860m) flagship hedge fund he ran for the Mayfair-based GLG is now managed by Steve Roth, formerly of Deutsche Bank, and a team of six.

Financial watchdogs are investigating whether Mr Jabre dealt in bonds of the Japanese financial group Sumitomo Mitsui after receiving insider information from advisers at the American investment bank Goldman Sachs.

GLG denies any wrongdoing, and it is thought the FSA has scaled back its investigation into GLG and Mr Jabre from two potential charges to one.

The FSA told GLG in October that its investigation focussed solely on "market abuse" - on whether Mr Jabre improperly used non-public information. The regulator abandoned potential charges of "systems and control violations", which would have accused the firm of a direct failure to properly supervise Mr Jabre's trading activities.

An independent accounting investigation into GLG by Deloitte turned up no instances of questionable or improper trading beyond the one Sumitomo trade in February 2003. Mr Jabre is a partner in GLG alongside Noam Gottesman and Pierre Lagrange, who founded the fund manager with Jonathan Green. Mr Green is no longer with the company.

Mr Jabre, formerly GLG's star trader, joined the firm in 1997 when it was owned by the investment bank Lehman Brothers from a London-based arm of the French bank BNP Paribas.

Industry insiders have described his investment style as "extremely aggressive" and GLG funds have delivered impressive annual returns of up to 30 per cent.

Hedge funds, unlike traditional investment funds, are able to achieve this because they are better able to employ a wider range of investment strategies across a broader range of markets.

The number of hedge funds has soared from fewer than 500 managing less than $100bn in 1990 to more than 8,000 today with more than $1,100bn under management. Many managers are geared towards achieving relatively modest returns for lower risk.