FCA shows iron fist for anti-competition in asset management
The Financial Conduct Authority (FCA) has issued its first formal decision which finds that three asset management firms breached competition law.
These are Hargreave Hale, Newton Investment Management, and River and Mercantile Asset Management (Ramam).
The FCA has fined Hargreave Hale £306,300 and Ramam £108,600. The FCA has not imposed a fine on Newton because it was given immunity under the competition leniency programme.
Christopher Woolard, executive director of strategy and competition at the FCA, says: “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.”
This follows on from November 2016, when the FCA said there was weak price competition in a number of areas of this sector and outlined its plans for “greater transparency”.
Now with this punishment it is laying down the law and sending out a clear message.
The infringements consisted of the sharing of information, on a bilateral basis, between competing firms during one initial public offering (IPO) and one placing, shortly before the share prices were set.
The firms 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 one firm to know another’s plans during the IPO or placing process when they should have been competing for shares.
The regulator says that over £31 billion was raised on just the London Stock Exchange (LSE) markets in new investment between 2015 and 2018. This shows how important it is to protect competition in the primary capital markets during a book-building process.
Separately, on 5 February 2019, the FCA announced that it had fined an individual under the Financial Services and Markets Act 2000 (FSMA) for conduct related to some of the same facts investigated under the Competition Act.
This decision follows a statement of objections issued in November 2017.
Under the competition leniency policy, a business that has been involved in a cartel may be granted immunity from penalties or a significant reduction in penalty in return for reporting cartel activity and assisting the FCA with its investigation.