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U.K.’s FCA fines 2 asset managers over exchanging IPO, pre-IPO information

The U.K.'s Financial Conduct Authority fined two money management firms for exchanging information during one initial public offering and one pre-IPO placement in 2015, the regulator said Thursday.

Hargreave Hale and River and Mercantile Asset Management were found in breach of competition law due to sharing information on share price they were willing to pay and the volume they wished to acquire shortly before prices were set during these events, the FCA said. The FCA did not disclose the names of the companies involved in the IPO and placing.

Following the FCA's first formal decision to exercise competition enforcement powers, Hargreave Hale and River and Mercantile Asset Management are set to pay penalties of 306,300 ($394,630) and 108,600, respectively.

"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," said Christopher Woolard, executive director of strategy and competition at the FCA, in a news release. "The FCA will act when markets that play a vital role in helping companies raise capital in the U.K.'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."

James Barham, CEO at River and Mercantile Asset Management, said in an emailed statement: "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."

A Hargreave Hale spokeswoman said in a separate statement: "We believe that the FCA has made a number of legal and factual errors in concluding that Hargreave Hale infringed competition law, and we are exploring our options with our legal advisers."

"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 behavior as a result," the spokeswoman said. "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."

The FCA also found Newton Investment Management in breach of the law but decided against imposing a fine. Instead, Newton was given immunity under the competition leniency program.

A Newton spokesman said in a separate emailed comment: "The investigation concerned the behavior and actions of a former 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," the Newton spokesman said.