Two fund managers fined for manipulating IPO prices

Hargreave Hale was ordered to pay £306,300 and River and Mercantile Asset Management (RAMAM) £108,600 by the UK’s financial watchdog.

Funds and Investment Trusts February 21, 2019 by Tom Bailey

Two fund managers have been fined for breaching competition law prior to an initial public offering.

Hargreave Hale was ordered to pay £306,300 and River and Mercantile Asset Management (RAMAM) £108,600 by the UK’s financial watchdog, the Financial Conduct authority.

Newton Investment Management was censured, but exempt from a fine due to its cooperation with the FCA’s investigation.

Specifically, the asset managers were accused of price collusion in the run up to the public listing of holiday retailer On The Beach Group. The fund managers, the FCA says, discussed the price they were willing to pay for the shares and 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,” said the FCA.

The sharing of price or buying intention before the IPO, the financial watchdog argues, threatens the ability of companies to raise capital through public listings. 

The FCA says: “This can reduce pressure to make bids that reflect what they really think the company is worth. This could reduce the share price achieved by the IPO or placing and so raise the cost of equity capital for the issuing company. 

According to Christopher Woolard, executive director for strategy and competition at the FCA, “Asset management firms must take care to avoid undermining how prices are properly set for shares in both IPOs and placings.”

The case was the first time the FCA has made use of its competition law powers.

The decision is being appealed by Canaccord Genuity, the owner of Hargreave Hale. According to the statement from the company: “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 behaviour as a result. 

“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.”

 

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