On 21 February 2019, the FCA fined two asset management firms for breach of competition law. No fine was imposed on the other asset management firm, Newton Investment Management Limited (Newton), as it had been given immunity under the competition leniency programme. This decision followed the FCA’s announcement on 4 February 2019 that it had fined Paul Stephany, a former fund manager at Newton, £32,200 for his conduct in relation to an Initial Public Offering (IPO) and a placing.
In 2015, Mr Stephany disclosed confidential information about his orders in relation to an IPO and a placing to external fund manager competitors, and attempted to influence them so that they would cap their orders at the same price limit as his orders (the Communications). The FCA found that, by sending the Communications, Mr Stephany had attempted to influence his competitors to use their collective power, thereby undermining the proper price formation process.
The FCA considered that, by sending the Communications and attempting to influence external fund managers, Mr Stephany had failed to observe proper standards of market conduct (in breach of Statement of Principle 3). It also found that Mr Stephany had demonstrated a lack of due skill, care and diligence (in breach of Statement of Principle 2) by failing to give adequate consideration to the risks associated in engaging in the Communications. While Mr Stephany had given some consideration as to whether certain of the Communications were appropriate, he had failed to search for, or identify, any relevant guidance from Newton and he had not consulted with Newton’s compliance department or his line manager. Further, Mr Stephany’s conduct was inconsistent with Newton’s policies and procedures.
The FCA’s investigation into the three asset management firms related to some of the same facts covered in Mr Stephany’s Final Notice. The FCA found that the asset management firms had disclosed and/or accepted otherwise confidential bidding intentions, in the form of the price they were willing to pay and sometimes the volume they wished to acquire. This allowed competitor firms to know one another’s plans during the IPO or placing process, which undermined the price setting process, in breach of competition law.
The FCA will publish a non-confidential version of its decision against the three asset management firms in due course. The FCA’s Final Notice in relation to Mr Stephany has already been published.