The FCA imposed a financial penalty of £32,200 on Paul Stephany, former fund manager at Newton Investment Management Limited for conduct failings in relation to an Initial Public Offering (IPO) and a placing. His failings reflected breaches of Principle 2 and 3.
On 21 September 2015, Stephany attempted to influence external fund managers at competitor firms to cap their orders in relation to an IPO at the same price limit as his. This followed a similar attempt by him 2 months earlier in relation to a placing by a different company.
In relation to both the IPO and the placing, Mr Stephany failed to observe proper standards of market conduct, contrary to Principle 3, as he was attempting to influence competitor firms in the allocation of shares. This meant that the proper price formation of both the IPO and the placing was potentially undermined for the advantage of the funds that Stephany managed. His actions risked causing harm to issuers and existing shareholders as they could have resulted in less capital being raised and existing shareholdings being valued at less than they might have been, and threatened the orderliness of the financial markets.
His conduct was also a breach of Principle 2 (due skill, care and diligence) by failing to give adequate consideration to the risks associated with engaging in such communications. He also failed to seek relevant guidance from Newton in sending such communication, and failed to consult the compliance department or his line manager in either the IPO or the placing for advice on whether his actions were appropriate.
As a result of the breaches, Stephany was given a financial penalty of £32,200. The FCA concluded that Stephany, being a market participant ought to have known that one fund manager seeking to persuade others at competitor firms to bid the same price as him, in an attempt for them to use their collective power to lower prices in capital raising, was improper.
It is notable that the case was a skill, care and diligence case, not an integrity case. The FCA imposed the penalty on the basis that it was Level 2 degree of seriousness case (where level 5 is the most serious). The matter is related to the FCA first competition case, which appears elsewhere in this edition.