Subject of Enforcement: Morgan Ingram Associates Limited (formerly SeedTribe Limited)
Date of Notice: 28th/ 01/2022
Overview: The FCA instructed that the Firm must terminate its relationships with the following Appointed Representatives (“ARs”) under their respective AR agreements by 17:00 on 6 December 2021. Those ARs being:
- RST Group Holding (t/a Acorn Property Group) (“Acorn”) [FRN 958801];
- Azure Capital Wealth (“Azure”) [FRN 941807];
iii. ASMX Pro (“ASMX”) [FRN 957165]; and
- Ribat Investments (“Ribat”) [FRN 958496]
The firm failed to have adequately assed the business of the Firm’s ARs in order to sufficiently identify and mitigate the risks their activities may pose to consumers.
The Firm had a lack of adequate systems and controls in relation to its onboarding and ongoing monitoring of the Firm’s ARs, in particular its failure to properly identify, assess and mitigate the inherent risks that arise from operation as a Principal or to properly assess their fitness and propriety, or ascertain their solvency. The Firm failed to properly oversee and conduct ongoing monitoring of its AR’s. There was also an inability of the firm to demonstrate that it conducts or will conduct its affairs with the exercise of due skill, care and diligence.
Penalty : Termination of relationships with the mentioned Appointed Representatives (“ARs”) under their respective AR agreements. The Firm must not appoint any additional ARs without the prior written consent of the Authority.
Subject of Enforcement: BlueCrest Capital Management (UK) LLP
Date of Notice: 22/12/21
Overview: Asset management firms operate as the agents of their customers and make investment decisions in financial markets on their behalf. The Authority has previously emphasised that when providing services, asset managers are susceptible to conflicts of interest arising between their own interests and those of their customers. Asset managers should not let conflicts of interest interfere with their obligations to customers, as this risks customers suffering harm
BCMUK recognised that the allocation of Portfolio Managers to the Internal Fund gave rise to a conflict of interest. However, in breach of Principle 8, its arrangements for managing that conflict were inadequate. In particular, the primary control on which BCMUK relied to manage and mitigate this conflict was the fact that decisions concerning the allocation of Portfolio Managers to the Funds were made by senior individuals who had a regulatory (and fiduciary) duty to serve the interests of the Funds and their investors.
However, decisions concerning the Internal Fund’s allocation of Portfolio Managers were made exclusively by the senior staff invested in it, which placed them in a situation where they stood to benefit from these decisions personally, in conflict with the duties they owed to investors in the External Fund. BCMUK failed to recognise that this control was ineffective, and indeed made the conflict of interest worse. BCMUK was aware of the material risks presented by this conflict but nevertheless approved the inadequate primary control intended to mitigate it. The Authority considers BCMUK’s conduct was reckless, rather than deliberate.
BCMUK’s systems and controls did not manage the risk that Portfolio Managers could be allocated in a way that favoured investors in the Internal Fund over those of the External Fund. Accordingly, BCMUK could not ensure that the interests of its customers would not be damaged. Moreover, investors in the External Fund paid management fees in the expectation that their investments would be managed appropriately. Against this background, BCMUK’s approach to how it managed the conflict arising from its role in ratifying the allocation of Portfolio Managers was inappropriate. BCMUK’s failure appropriately to manage this conflict resulted in a sub-standard investment management service being provided to the External Fund and its investors.
Penalty : A financial penalty of £40,806,700
Original Notice: https://www.fca.org.uk/publication/decision-notices/bluecrest-capital-management-uk-llp.pdf