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FCA fines asset managers over competition law breaches

The Financial Conduct Authority (FCA) has issued its first decision under competition law, fining two asset managers a total of almost £415,000

FCA fines asset managers over competition law breaches

The Financial Conduct Authority (FCA) has fined two asset managers and censured another over breaches of competition law.

Hargreave Hale was fined £306,300 while River and Mercantile Asset Management (RAMAM) received a £108,600 fine in the FCA's first decision using competition enforcement powers. 

A third firm, Newton Investment Management, was not fined because it assisted the FCA with its investigation. 

According to the FCA, the firm shared strategic information between competing firms during one initial public offering (IPO) and one placing, shortly after prices were set. 

The firms disclosed and accepted what should have been confidential bidding intentions, including the price they were willing to pay, and in some cases the volume they wished to acquite. This allowed one firm to know another's plans during the IPO or placing process when they should have been competing for shares. 

Christopher Woolard (pictured), executive director of strategy and competition at the FCA, said: 'This is our first case using our competition law powers and demonstrates our commitment to taking enforcement action to protect competition.

'Asset management firms must take care to avoid undermining how prices are properly set for shares in both IPOs and placings. Failure to do so risks them acting illegally.

'The FCA will act when markets that play a vital role in helping companies raise capital in the UK’s financial markets are put at risk. We can also take regulatory action against an individual and did so here with respect to some of the same facts.'

James Barham, Chief Executive at RAMAM, said: 'We are pleased the FCA has reached a conclusion in what has been a long and complex investigation.

'We have always believed passionately in maintaining the highest standards in everything we do and, while we are disappointed the FCA has come to this decision, we are confident the ongoing investment we have made in our procedures and processes clearly demonstrates our commitment to uphold these standards.'

On 5 February 2019, the FCA revealed it had fined former Newton fund manager Paul Stephany £32,200 for his conduct during the IPO of On the Beach Group (OTB) in 2015.

Stephany, who ran the £1 billion Newton UK Equity fund, emailed himself, copying in 14 external fund managers, on 21 September 2015 regarding the OTB IPO.

The email read: ‘I wanted to urge those considering or in for the OTB IPO to think  about moving to a £260 million pre-money valuation limit. I have done that first thing this morning with my £17 million order.’

The regulator also decided to drop action over conduct between Artemis Investment Management and Newton. 

Canaccord challenge

Canaccord Genuity, which acquired Hargreave Hale in September 2017, is challenging the FCA's decision. 

A Canaccord spokesperson said: 'Based on our initial review of the FCA’s decision in connection with its Competition Act investigation, we believe the FCA has made a number of legal and factual errors in concluding that Hargreave Hale infringed competition law, and we are exploring our options with our legal advisers.

'In particular, Hargreave Hale was simply a recipient of information that was provided on an unsolicited basis by another fund manager and did not alter its own bidding behaviour as a result. We have co-operated fully with the FCA throughout its investigation and have provided comprehensive evidence and arguments to support our view that no infringement involving Hargreave Hale occurred.

'We note that none of the individuals representing our organisation has been investigated by the FCA and we remain confident that Hargreave Hale employees conducted themselves professionally and in the best interests of clients.

'We would add that the FCA used the same criteria in calculating financial penalties for all parties. The different penalty level reflects Hargreave Hale’s higher turnover in the relevant market.'

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