The Financial Conduct Authority has revealed that Gam’s failure to manage conflicts of interest between its star bond manager Tim Haywood and Greensill Capital is what led to it being slapped with a multi-million pound fine.
The watchdog revealed last December it had fined the Swiss manager £9.1m ($12m, €11m) for its role in the implosion of Haywood’s £8.5bn absolute return bond fund (ARBF) range. However, it did not provide full details of the case on the basis it involved another party who is not a subject of the final notices and “may be affected by them”.
In its final notices published on 30 March 2022, it specified two of the three conflicts Gam failed to manage involved Greensill Capital, the supply chain company owned by Australian financier Lex Greensill.
Haywood, who was sacked for gross misconduct by Gam in 2019, was wined and dined by Greensill over several years, and was treated to trips on the ex-banker’s private jet, lavish meals and even a classical concert at Buckingham palace.
Conflicts of interest
His ARBF portfolio was filled with highly illiquid bonds used to finance infrastructure projects arranged by Greensill and British steel magnate Sanjeev Gupta, who had been introduced to Haywood by Greensill in 2017.
Greensill Capital collapsed into administration last year, while Gupta’s steel empire was also fighting for survival.
“Potential incentives were offered which would have provided benefits to Gam or its parent company. Although these were not taken up, they were not dealt with properly by Gam,” the FCA said.
The FCA fined Haywood £230,037 for receiving gifts and entertainment, including “travelling on a Greensill private jet”, and failing to record them in a timely manner with Gam. The fine includes the value of the gifts and entertainment which totalled £22,437.
The regulator said it did not find evidence that Haywood made investment decisions because of these gifts and entertainment, but added “the fact that conflicts were not properly managed heightened the risk that he may have been incentivised to invest for personal interest”.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “A robust framework, properly implemented and followed by all staff, is required to manage any conflicts of interest. [Gam] failed to do this. In an asset manager, this is vital in ensuring decisions are taken for the benefit of the investors. Mr Haywood’s disclosure failings are equally serious ones.
“The FCA expects asset managers and their staff to be scrupulous in identifying and managing conflicts and their risks. This case should send a clear warning to the market.”
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