Financial Conduct Authority  

FCA fines two fund houses in competition law first

FCA fines two fund houses in competition law first

The Financial Conduct Authority has used its competition enforcement powers for the first time, fining two fund houses a total of £414,900.

The regulator fined asset management firms Hargreave Hale and River and Mercantile Asset Management £306,300 and £108,600 respectively for breaching competition law in relation to an initial public offering.

A third firm, Newton Investment Management, was spared a fine under competition leniency policy, which dictates a business may be granted immunity if it assists the FCA with its investigation.

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Though earlier this month the FCA fined Newton fund manager Paul Stephany £32,000 for his role in the matter.

According to the regulator, the competing asset management firms shared "strategic information" during one initial public offering and one placing in 2015, shortly before share prices were set.

The FCA said the companies disclosed or accepted confidential bidding intentions, in the form of the price they were willing to pay and sometimes the volume they wished to acquire.

This would allow one firm to know another's plans during the IPO or placing process when they should have instead been competing for shares.

The regulator warned unlawful information sharing could increase the cost of related investments or even make them unviable.

Christopher Woolard, 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."

The FCA had also investigated Artemis Investment Management, but decided there were no grounds for action.

James Barham, chief executive at River and Mercantile, said: "We are pleased that 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."