Enforcement

FCA issues its first decision under competition law

FCA Press Release

“The [UK’s] Financial Conduct Authority (FCA) has 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 firms are:

  • Hargreave Hale Ltd

  • Newton Investment Management Limited

  • River and Mercantile Asset Management LLP (RAMAM)

The FCA has fined Hargreave Hale £306,300 and RAMAM £108,600. The FCA has not imposed a fine on Newton because it was given immunity under the competition leniency programme.

The infringements 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. 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. 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.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said:

'This is our first case using our competition law powers and demonstrates our commitment to taking enforcement action to protect competition. Asset management firms must take care to avoid undermining how prices are properly set for shares in both IPOs and placings. Failure to do so risks them acting illegally. The FCA will act when markets that play a vital role in helping companies raise capital in the UK’s financial markets are put at risk. We can also take regulatory action against an individual and did so here with respect to some of the same facts.'

Over £31 billion was raised on just the London Stock Exchange (LSE) markets in new investment between 2015 and 2018. This shows how important it is to protect competition in the primary capital markets during a book-building process.

The FCA has also decided that there are no grounds for action in respect of conduct between Artemis Investment Management LLP and Newton that took place between April and May 2014 in relation to an IPO.

Separately, on 5 February 2019, the FCA announced that it had fined an individual under the Financial Services and Markets Act 2000 (FSMA) for conduct related to some of the same facts investigated under the Competition Act”.

Credit: FCA Press Release

Comment

The FCA has had competition law enforcement powers since 2015, but has only just used these powers in the above case, which is all about anti-competitive exchange of strategic information between asset management firms. The issue here was the sharing of confidential bidding intentions.

This sharing of information effectively undermines price setting processes, which could have an impact on the cost of related investments.

Traditionally, the Competition and Markets Authority (CMA) have led the way in investigating suspected competition law infringements. But the recent appointment of Sheldon Mills, a former Senior Director at the CMA, as the FCA’s new Director of Competition demonstrates the FCA’s commitment to competition law enforcement.

Ultimately, the message is: the FCA are upping their enforcement game - they are a regulator with teeth, and financial institutions need to continually review compliance policies and risks, including with regard to the sharing of information. If in doubt, seek legal advice!

Health & Safety

The Health and Safety Executive ("HSE") is the national regulator for workplace health and safety.

Interestingly, on its website, there is a page for debunking health and safety myths (click here), such as the one where flags were banned from civic cars for “health and safety”, or the removal of alcohol from a workplace Christmas party.

So, what do they do?

 The HSE “mission” is to prevent work-related death, injury and ill-health. They concentrate on the most serious risks, targeting industries with the greatest hazards and sectors with the worst risk management records. They provide free guidance and advice, inspect premises and investigate when things go wrong.

What powers do they have?

They can inspect premises, speak to relevant people, observe workplace activities, check whether risk controls are effective and identify any breaches. In doing so, they can consider taking enforcement action and investigate any potential offences.

What is enforcement action?

They can provide advice, serve notices, withdraw approval or vary licences, conditions or exemptions. More seriously they can issue cautions or prosecute. If you do breach any regulations you can be made to pay for the time it takes the HSE to help you to put the breach right.

Investigations

The HSE will investigate serious work-related incidents, injuries or cases of ill-health, in line with its incident selection criteria, as they do not investigate everything that is reported to them. Cases can be brought against corporate bodies and in some cases individuals as well.

What sentence could you get?

There aren’t any specific sentencing guidelines for health and safety offences other than corporate manslaughter although they are likely to come under general offence guidelines that are currently being consulted upon.

Recent cases

Air Liquide (UK) Ltd was fined £160,000 after pleading guilty to breaching section 2(1) of the Health and Safety at Work etc. Act 1974. Members of their emergency response team were appropriately dressed to dispose of redundant gas bottles; however, one was dropped spilling highly hazardous fluid to the floor. Vapour drifted to 2 unprotected workers affecting one so severely he collapsed to the floor.

Bartram Manufacturing Ltd pleaded guilty to breaching section 2 of the Health and Safety at Work etc. Act 1974 and was fined £82,000. A forklift truck reversed into a stack of roof trusses which fell onto an employee causing multiple fractures.

WE Rawson Ltd was fined £600,000 for breaching section 2(1) of the Health and Safety at Work etc. Act 1974. An employee died following crush injuries received when he attempted to free a stuck package from a packaging machine. The HSE found the company failed to take measures to prevent access to the danger zone between the moving conveyers.

Simon Thomerson of Clearview Design and Construction Ltd was jailed for eight months following the death of two labourers employed by him when they were involved in an explosive fire within a work unit. He pleaded guilty to breaching section 2(1) of the Health and Safety at Work etc. Act 1974.

How can I help?

Even though a case may be investigated by the HSE rather than the police, you can still be under investigation for criminal offences that can lead to imprisonment or very substantial fines for companies.

You need expert advice from the outset which we can provide. To discuss any aspect of your case, please contact me on 07766001774 or via email (contact@crimelawyer.co.uk).