The City watchdog said Prudential breached FSA Principles and UKLA Principles as it “failed to inform it of the proposed acquisition" of the Asian arm of American insurer AIG "until after it had been leaked to the media on 27 Feb 2010”.
In a statement, the FSA said Prudential should have informed it at the earliest opportunity of its plans in order to allow the regulator to decide whether to approve or reject the deal on regulatory grounds.
The FSA seemed particularly concerned that Prudential failed to disclose the planned transaction “even when, at a meeting between the FSA and Prudential executives on 12 Feb 2010, the FSA asked detailed questions about Prudential’s strategy for growth in the Asian market and its plans for raising equity and debt capital”.
Part of the bid would have involved a £14.5bn rights issue, which would have been the biggest ever in the UK, and, according to the FSA, had the potential to impact upon the stability and confidence of the financial system in the UK and abroad.
Tracey McDermott, FSA director of enforcement and financial crime, said: “The FSA expects to have an open and frank relationship with the firms it supervises and with listed companies. It is essential that firms give due consideration to their regulatory obligations at all times.
“In particular, timely and proactive communication with the FSA is of fundamental importance to the functioning of the regulatory system and the integrity of the market.”
Thiam censured
In addition to the fine, Tidjane Thiam, who was the chief executive of Prudential at the time of the bid and remains so, was censured by the FSA. The regulator said Thiam played a “significant role, with others, in the decision not to contact the FSA” and was therefore “knowingly concerned in this breach”. In censuring him, the FSA said it made “no finding of lack of fitness and propriety” in relation to him.
“Thiam has also been censured in relation to his role in this matter,” added McDermott. “This case should send a clear message to all board members of their collective and individual responsibility for the decisions they make on behalf of their companies.”
At the time of the planned transaction, Thiam took considerable flack from shareholders, with Robin Geffen, CEO and CIO of Neptune Investment Management leading a “shareholder action group” which opposed the bid.
In response to the FSA’s action Prudential chairman Paul Manduca said: “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. The board wishes to express its satisfaction that all parties have agreed to this settlement.”
