FCA fines two asset management firms for competition breach

Hargreave Hale has been fined £306,300 and River and Mercantile Asset Management received a fine of £108,600. The FCA has not imposed a fine on the third firm, Newton Investment Management, because it was given immunity under the competition leniency programme.

An investigation found that strategic information was shared between competing asset management firms during one initial public offering and one placing, shortly before the share prices were set.

The firms disclosed and/or accepted otherwise confidential bidding intentions, in the form of the price they were willing to pay and sometimes the volume they wished to acquire. This allowed one firm to know another's plans during the IPO or placing process when they should have been competing for shares.

The FCA said such practices "undermine the process by which prices are set" and can reduce the share price achieved by the IPO.

In a statement, the regulator said: "Firms rely on such capital as a way of financing investments, so unlawful information sharing could increase the cost of related investments or even make them unviable.

"Over £31 billion was raised on just the London Stock Exchange markets in new investment between 2015 and 2018. This shows how important it is to protect competition in the primary capital markets during a book-building process."

The FCA decided that 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.

Separately, on 5 February 2019, the FCA announced that it had fined an individual under the Financial Services and Markets Act 2000 for conduct related to some of the same facts investigated under the Competition Act.

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. We can also take regulatory action against an individual and did so here with respect to some of the same facts."