UK regulator fines GAM and former star fund manager for managing relationship with Gupta

The UK’s Financial Conduct Authority has fined Swiss wealth manager GAM £9.1m and former star fund manager Tim Haywood £230,037 for failing to manage a conflict of interest in a case The scandal that rocked the company was once at its peak.

The scandal centered on Haywood’s purchase of illiquid debt linked to UK metal magnate Sanjeev Gupta and Australian financier. Lex Greensil, the founder of the supply chain finance company of the same name that collapsed earlier this year.

GAM ban Haywood in July 2018, initially with little public explanation. In response, investors in his Absolute Return Bonds fund quickly sought to get their money back, forcing GAM to suspend and then liquidate the fund.

The suspension sent GAM shares plunging and chief executive Alexander Friedman step down as wealth managers struggle to stem massive client cash flows.

One of Haywood’s close colleagues, Daniel Sheard, prompted the FCA’s investigation by writing to the regulator with the list of allegations in March 2018. Sheard became concerned about Haywood’s bond purchases, his relationship with Gupta and Greensill, as well as the risk of centralized exposure to Gupta businesses.

In a statement on Thursday, the FCA said it had fined GAM International Management Limited £9.1 million for “failing to conduct its business with care, skill and diligence” due to the unavailability of system to prevent conflicts of interest from 2014 to 2018.

Haywood was fined £230,037 for not taking “reasonable steps” to comply with conflict of interest rules and for failing to comply with GAM’s gifts and entertainment policy. Both fines reflect the 30% discount offered by GAM and Haywood.

“We fully accept the FCA’s findings and acknowledge the conflicts of interest that occurred at the company between late 2014 and early 2018,” said Peter Sanderson, chief executive officer of GAM.

Sanderson added that his company has made improvements to ensure that “all the lessons learned from that period are incorporated into our company and culture.” The GAM statement said that “there is no other legal investigation into GAM” into the matter.

The property manager said in August 2018 that its own investigation found Haywood may have failed to perform an adequate due diligence and may also have violated company policy that requires contracts to be signed by two people. It said he broke the rules about receiving gifts and entertainment and using his personal email for work purposes.

Haywood was Dismissal from GAM early next year after an internal investigation discovered “serious misconduct”. The company said “there has been a serious failure to achieve the standard of skill and care that is expected of a person in his position.”

At the time, Haywood said he rejected the “many findings” of the investigation and said he was treated unfairly and made a “scapegoat”, noting that “the vast majority of allegations have been dropped.” remove”. In May 2019, he flew to GAM’s annual general meeting in Zurich but was blocked since entering.

In a statement on Thursday, Haywood said, “I am pleased to have this issue resolved after a long time. I’m really sorry for the mistakes I’ve made and I’ve learned a bunch of very important lessons. ”

Among the illiquid notes Haywood purchased were Greensill bonds that financed the acquisition of Gupta’s hydroelectricity and metallurgical operations at Lochaber in Scotland. In November, Financial Times disclosure that the Scottish government had guaranteed £586 million for Gupta’s business.

Haywood’s ARBF portfolios were finally liquidated in July 2019, with investors receiving an average of 100.5% of the value of their investment.

Greensill collapsed in March of this year, plunge Gupta’s business was in crisis. Greensill is currently under a separate investigation by the FCA. The Serious Fraud Office has launched an investigation into suspected fraud, fraudulent transactions and money laundering at Gupta businesses.

In July 2019, a year after his initial suspension, Haywood reach an agreement with GAM, in which neither party will pursue the other, avoiding the prospect of an employment tribunal. GAM also hired former BlackRock executive Peter Sanderson as CEO in an effort to defuse the turmoil, but its stock has fallen about two-thirds since.

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