FSA fines Martin Currie £3.5m
The Financial Services Authority has fined Martin Currie Investment Management and Martin Currie Inc £3.5m for failing to manage a conflict of interest between two of its clients.
The investment firm has also been fined £5.15m by the Securities and Exchanges Commission in the US, bringing the total fine to £8.65m.
The FSA says the firms’ misconduct breached FSA Principle 2 (skill, care and diligence), Principle 3 (management and control) and Principle 8 (conflicts of interest).
The conflict of interest arose when Martin Currie caused one client (Fund B) to enter into an ill-advised transaction which rescued another client (Fund A) from serious liquidity concerns. Both Fund A and Fund B focused on making investments in the China market, and were managed by Martin Currie from its Shanghai office.
The FSA says it is the largest fine it has imposed in a conflict of interest case.
FSA acting director of enforcement and financial crime Tracey McDermott says: “Effective identification and management of potential conflicts of interest between clients is a core requirement for asset managers.
“This transaction gave rise to an obvious risk of a conflict which Martin Currie was slow to identify and then failed to manage adequately.
“It is no excuse that some of Martin Currie’s failings resulted from the actions of individual fund managers.
“The primary responsibility for ensuring compliance with a firm’s regulatory obligations rests with the firm, and senior management must ensure that there are adequate systems and controls in place to manage conflicts and to oversee the actions of employees.
“The action taken by both ourselves and the SEC should leave firms in no doubt about the serious consequences of this type of failure.”
Martin Currie chief executive Willie Watt says: “The issue relates to three unlisted investments that originated back in 2007 in a specialist part of our business.
“We compensated the affected client and returned all related fees earned. Following our comprehensive review, significant improvements have been made to our business including reinforcements to our governance function, changes to our management team and closing the unit down.
“It is good to reach the end of the regulatory process, and put this behind us allowing for the business to move forward.
“The injection of fresh capital in the business means we are financially strong and demonstrates a clear vote of confidence by Martin Currie’s directors and the continued support of our external shareholders.”