RegulationDec 22 2016

Former BlackRock fund manager jailed over insider dealing

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Former BlackRock fund manager jailed over insider dealing

Former BlackRock fund manager Mark Lyttleton has been jailed for a year after pleading guilty to two counts of insider dealing.

The 45-year-old, who ran high profile UK equity funds at BlackRock, had been charged in relation to trading in two energy firms between October 2 2011 and December 16 2011.

In sentencing Lyttleton, Judge Andrew Goymer said: “Insider dealing is not a victimless crime, I regard these offences as pre-meditated and blatantly dishonest.”

Police officers raided Lyttleton’s home in April 2013 while simultaneous searches were also carried out at a number of addresses in Switzerland.

He was then arrested following a Financial Conduct Authority investigation which began in 2012.

The investigation found that in November 2010 Lyttleton purchased a Panamanian registered company called Huduno Invest SA and placed the beneficial ownership of it in the name of his wife, using her maiden name.

Huduno then entered into an asset management agreement with Swiss-based asset management company Caldwell & Partners providing that company with discretion to place trades on Huduno’s behalf, but also to execute instructions from Huduno.

Having obtained inside information, Lyttleton then instructed Caldwell and Partners to trade in the stocks of EnCore Oil Plc and Cairn Energy Plc on behalf of Huduno. 

The trading was ordered through the trading account held in the name of Huduno at Switzerland-based Banque Heritage, using two UK based brokerages.

The information related to a proposed takeover of EnCore Oil and drilling results from one of Cairns Energy’s wells in Greenland.

BlackRock was a major shareholder in both of these companies.

Both these stocks were at placed on BlackRock’s restricted trading list upon portfolio managers receiving what in their judgement amounted to price sensitive inside information concerning the stocks.

BlackRock’s personal account dealing policy also required Lyttleton to declare personal trading accounts he or his immediate family held.

While he did inform them of a number of accounts, he failed to disclose that Huduno had a trading account at Banque Heritage or seek pre-trade clearance for any of his trading in EnCore or Cairn.

After his house was searched, two mobile phones were recovered, one of which was an unregistered mobile phone, and the other registered in a false name and address.

Both contained only one contact number, assigned to false names of ‘Fred’ and ‘George’, with enquiries establishing this number was registered to his Swiss asset manager.

Lyttleton made a number of large cash withdrawals totalling £160,000 from his London-based bank accounts and following a review of text messages on his mobile phone it was established this money was withdrawn to make payment in cash to his asset managers as opposed to sending electronic payments.