On 21 February 2019, the FCA issued a decision which finds that 3 asset management firms breached competition law. This is the FCA’s first formal decision under its competition enforcement powers.
The infringements found by the FCA consisted of the sharing of strategic information, on a bilateral basis, between competing asset management firms during one initial public offering and one placing, shortly before the share prices were set. The firms disclosed and/or accepted otherwise confidential bidding intentions, in the form of the price they were willing to pay and sometimes 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.
Asset managers bid for the shares they want in IPOs and placings against competing asset managers in prevailing market practice. The FCA found that if asset managers share detailed and otherwise confidential information about their bids with each other, they undermine the process by which prices are set. 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 the FCA, firms rely on such capital as a way of financing investments, so unlawful information sharing could increase the cost of related investments or even make them unviable.
The FCA has fined Hargreave Hale Ltd £306,300 and River and Mercantile Asset Management LLP (RAMAM) £108,600. The FCA also found that Newton Investment Management Limited was involved in the anti-competitive conduct, but it was not fined because it was given immunity under the competition leniency programme.The companies now have two months to appeal the FCA’s decision.
Daniel Beard QC is acting for Hargreave Hale.