UK regulator have fined BlueCrest Capital Management of UK (the former hedge fund) more than £40 million because it failed to manage a conflict of interest among its investors in a U.S regulatory finding the previous year.
The Financial Conduct Authority said that the company was offering a ‘substandard’ service for its clients on Wednesday during a provisional decision. The firm which was set up by billionaire Mike Platt failed to recognize and manage the risk, as well as the disadvantages to investors that came with moving its fund managers from a fund from external investors to a fund that invested staff money.
The FCA also added that its disclosures to its investors were ‘entirely insufficient and, at times, misleading’. Its decision covers the period between the 1st of October 2011 to December 31st 2015.
The news comes a little over a year after the US Securities and Exchange Commission found that BlueCrest, prioritized its internal funds instead of its flagship fund since its conversion to a family office six years ago. The firm agreed to returning $170 million to its investors as part of the settlement.
BlueCrest has yet to make an official statement, but it is resorting to help from the Upper Tribunal, which hears legal challenges in regards to the FCA.
“Given the ongoing legal process, we are not in a position to comment on our case which is now before the Upper Tribunal. However, we intend to vigorously defend against the FCA’s allegations which relate to conduct that occurred six to ten years ago,” said the firm.
“In January 2016, we converted into a private investment partnership, and as such, this case does not relate in any way to our current business operations,” they added.
The FCA retaliated by saying that the same senior management that took decision about allocating traders to the internal fund also invested in that fund. This “placed them in a situation where they stood to benefit from these decisions personally,” the FCA added.
Investors were also told that not many traders were moved to the internal fund and that a significant sum of money was being handled by the RMT.
The FCA then fined the firm £40,806,700.
When the firm decided to focus on running internal money in 2015, Platt said that his risk-taking was restrained because of external investors. Since the firm converted into a family office, BlueCrest has been one of Europe’s most successful macro-trading firms, which repeatedly drew in double digit gains.
‘UK regulator fines BlueCrest Capital £40m for ‘reckless’ conduct‘- Financial Times
