The FSA has fined Prudential £30m and censured its chief executive Tidjane Thiam for failing to inform the regulator at an appropriate time it was seeking to acquire AIG’s Asian arm AIA in early 2010.
The fine is split between Prudential plc which was fined £14m for failing to deal with the FSA in an open and co-operative manner, and The Prudential Assurance Company which was fined £16m for the same reason.
Pru did not inform the FSA of the proposed AIA deal until after it had been leaked to the media on 27 February 2010.
The FSA says the company failed to disclose the bid despite a meeting between the regulator and Prudential executives on 12 February 2010, when the FSA asked detailed questions about Pru’s strategy for growth in the Asian market and its plans for raising equity and debt capital.
Pru launched its failed $35bn (£23bn) bid to acquire AIA in March 2010, which was to involve a rights issue of £14.5bn, the biggest ever in the UK.
The FSA says Pru’s failure to inform the regulator of the deal was significant because it meant the FSA had to consider highly complex issues in a short space of time before deciding whether to suspend Pru’s shares.
The regulator says this risked delaying the publication of the rights issue prospectus and hampered the regulator’s ability to help overseas regulators supervise the deal.
Thiam has been censured as he played a significant role, along with others, in the decision not to contact the FSA about the proposed deal.
FSA director of enforcement and financial crime Tracey McDermott says: “Prudential, led by Thiam as chief executive, failed to give due consideration to its obligation to inform the FSA of this transaction, which would have had a huge impact on the group had it gone through.
“That was a serious error of judgement for which Prudential is paying the price. Firms should be in no doubt as to the importance of early communication with the regulator in respect of transformational transactions to avoid market and investor disruption.”
Prudential chairman Paul Manduca says: “The board has decided to settle this matter in the best interests of the group and all its stakeholders. We wish to draw a line under the matter, and to ensure our constructive relationship with our regulators remains good. Tidjane acted at all times in the interests of the company and with the full knowledge and authority of the board.
“Prudential works hard to maintain close and positive relationships with its regulators and the group’s relationship with the FSA continues to be good. The FSA has determined it should have been informed earlier about the fact we were contemplating the AIA transaction and we regret, with hindsight, not so doing.”
It emerged the FSA was investigating Pru’s failed bid for AIA in April 2011. The deal failed after Pru shareholders forced the company to renegotiate the price, which AIA refused to accept.
In August 2010 Pru revealed its failed bid for AIA had cost the company £377m.