(Bloomberg) -- A new hedge fund firm led by a former Segantii Capital Management Ltd. portfolio manager said it won approval in principle from Hong Kong’s securities watchdog on Thursday, clearing a major regulatory hurdle.

The nod for Viridian Asset Management Ltd. provides a ray of light for dozens of Segantii employees who are now seeking alternative employment or even looking to start their own hedge funds after authorities began a criminal prosecution of Segantii, its founder Simon Sadler and a former trader for alleged insider trading ahead of a June 2017 block trade.

A full license from the city’s Securities and Futures Commission is expected within days, with Viridian now getting ready to start trading on Aug. 1, the Hong Kong-based firm said in an emailed update to clients and potential investors. Founder Pascal Guttieres confirmed the contents of the email while declining to comment on Segantii. The SFC declined to comment. 

“The same governing body that is prosecuting Pascal’s previous employer is also authorizing Pascal to run an asset management business in Hong Kong, focused on ECM,” said the email, referring to equity capital market deals. 

The case against Segantii, which has yet to go to trial, is expected to drag on for months. It has already led to the shuttering of what was one of Asia’s largest and most consistently performing hedge funds. Segantii employed 151 people in Hong Kong, London, New York and Dubai at the end of March and had nearly $4.8 billion before it announced in May it was returning capital to clients. 

Guttieres headed UBS Group AG’s block trading team in European, the Middle East and Africa out of London before moving to Hong Kong in 2012 to oversee the same business in Asia. He then spent seven years as a portfolio manager at Segantii from June 2016.

While he was employed at Segantii, Guttieres handled deals that were arranged by banks’ ECM desks and required so-called wall crossing — a formal process in which banks demand clients swear not to act on confidential information shared ahead of upcoming deals. It coincided with the period when the firm, Sadler and former trader Daniel La Rocca made a block trade that is now being prosecuted for insider dealing.

Equity capital markets typically include initial public offerings, block trades and other follow-on share sales by companies and their stakeholders. Block trades are off-exchange sales of large amounts of shares by listed companies or their shareholders. While many such deals are arranged by banks’ ECM teams, some share sales by existing institutional investors of listed companies are channeled through brokers’ trading desks. 

In Hong Kong, the SFC last year launched a public consultation on proposed “market sounding” guidelines that would govern how banks and brokers can share non-public information when they are gauging investor demand for such stock sales. 

“Our chief compliance officer has been invited by the SFC to provide comments on its draft guidelines on market sounding,” Viridian said in the email. “We are happy to report that our policies around information barriers are already more conservative than the new ask.” 

Viridian is expected to start trading with nearly a dozen staff members and $100 million to $200 million of capital, including money from a European insurer and other smaller investors, Guttieres said.

The firm has signed on UBS and Citigroup Inc. as its prime brokers, according to the email. It is working on arrangements to trade with nearly 20 banks and brokers from the start, allowing it to participate in ECM deals across the region. It is looking to increase the roster to more than 30 by year-end. 

A head of investor relations will join in September. The firm is in talks with candidates to fill two other positions on its investment team, the email said, without identifying the individuals. 

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