FCA fines ex-fund manager over IPO manipulation

FCA fines ex-fund manager over IPO manipulation

The Financial Conduct Authority has fined a former fund manager for his attempt to influence share prices in an initial public offering.  

Paul Stephany, formerly of Newton Investment Management, was fined £32,200 for contacting fund managers at competitor firms and attempting to manipulate the prices of their order books.

Mr Stephany managed four funds that invested in UK equities at Newton and on two separate occasions in 2015 submitted orders as part of a book build for shares that were to be quoted on public exchanges.

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Before the order books for the new shares closed, Mr Stephany contacted other fund managers and attempted to "influence them to cap their orders" at the same price limit as his own orders.

In a final notice published today (February 5) the FCA said Mr Stephany sent an email to himself on September 21, 2015, and blind copied it to 14 external fund managers at 11 competitor firms. 

The email read: "I wanted to urge those considering or in for the OTB (On The Beach Group plc) IPO to think about moving to a 260m pre money valuation limit. I have done that first thing this morning with my 17m order."

In doing so, the FCA found Mr Stephany risked "undermining the integrity of the market and the book build" by trying to use their "collective power".

The regulator said Mr Stephany failed to observe proper standards of market conduct and acted without "due skill, care and diligence."

In February 2016 Mr Stephany stepped down as manager of the then £1bn Newton UK Equity fund, which he had managed since September 2014.

A spokesman for Newton said: "It is not our policy to comment on matters relating to former (or current) employees; however, Newton IM has been cooperating fully with the FCA and will continue to do so until it reaches its conclusion."

Mark Steward, executive director of enforcement and market oversight at the FCA, said: "This matter underscores the importance of fund managers taking care to avoid undermining the proper price formation process in both IPOs and placings.

"These markets play a vital role in helping companies raise capital in the UK’s financial markets and when they are put at risk the FCA will take action."

The FCA said its proceedings against Mr Stephany were separate to the investigation into Newton which it launched in 2017.

Since November 2017, the FCA has been investigating four fund houses - Artemis Investment Management, Hargreave Hale, Newton Investment Management and River & Mercantile Asset Management - over concerns they may have broken competition rules by colluding on the price they would pay for shares coming to the market.