Hargreave Hale is disputing the Financial Conduct Authority’s decision that it is one of three firms to have breached competition law relating to its participation in an IPO and market placing in 2015.
The FCA announced on Thursday that Hargreave Hale, River and Mercantile Asset Management (RAMAM) and Newton Investment Management had broken competition law due to sharing, or accepting from others, the price they intended to pay for the IPO and placing in question.
It has fined Hargreave Hale, which is owned by Canaccord Genuity Wealth Management, £306,300 and RAMAM £108,600 for their role in the scandal. Newton Investment Management, however, escaped a financial penalty under the competition leniency programme.
The FCA said the infringement concerned the firms disclosing and/or accepting otherwise confidential bidding intentions, in the form of the price they were willing to pay and sometimes the volume they wished to acquire, ahead of the IPO and placing.
This allowed one firm to know another’s plans during the IPO or placing process when they should have been competing for shares, it said.
‘Legal and factual errors’
However, in a statement responding to the decision, Hargreave Hale claimed the regulator has made “a number of legal and factual errors” and that it is exploring its options with its legal advisers.
It added: “In particular, Hargreave Hale was simply a recipient of information that was provided on an unsolicited basis by another fund manager and did not alter its own bidding behaviour as a result.
“We have co-operated fully with the FCA throughout its investigation and have provided comprehensive evidence and arguments to support our view that no infringement involving Hargreave Hale occurred.
“We note that none of the individuals representing our organisation has been investigated by the FCA and we remain confident that Hargreave Hale employees conducted themselves professionally and in the best interests of clients.
“We would add that the FCA used the same criteria in calculating financial penalties for all parties. The different penalty level reflects Hargreave Hale’s higher turnover in the relevant market.”
End of a long and complex investigation
RAMAM chief executive James Barham said the firm is pleased that the FCA has reached a conclusion in 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,” he said.
Earlier this month, the FCA fined former Newton fund manager Paul Stephany for attempts to influence rival firms to squeeze down pricing on summer holiday retailer On The Beach Group’s IPO and the placing for Guernsey-domiciled real estate business Market Tech.
A spokesperson for Newton said: “The investigation concerned the behaviour and actions of a former Newton employee, dating back to 2014 and 2015, which contravened our code of conduct and ethical standards. The former employee in question was dismissed, and thorough internal and independent reviews of our systems, control and risk culture established that this was an isolated case which in no way represents our business as a whole.”
Undermining prices risks firms acting illegally
FCA executive director of strategy and competition Christopher Woolard said: “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. We can also take regulatory action against an individual and did so here with respect to some of the same facts.”
The regulator first announced in November 2017, that Artemis, Hargreave Hale, Newton and River and Mercantile were being investigated for breaking competition law due to sharing, or accepting from others, the price they intended to pay in two IPOs and one placing.
However, in the latest decision the FCA has deemed there are no grounds for action in respect of conduct between Artemis Investment Management and Newton that took place between April and May 2014 in relation to an IPO.
