The Financial Conduct Authority (FCA) has today issued a decision which found that three asset management firms were in breach of competition law, marking the regulator’s first formal decision under its competition enforcement powers.

The three firms found guilty of breaching competition law are Hargreave Hale, Newton Investment Management and River and Mercantile Asset Management (RAMAM).

The FCA has fined Hargreave Hale £306,000 and RAMAM £108,600. However, the authority has not imposed a fine on Newton Investment Management because it was granted immunity under the competition leniency programme.

The regulator reported that the infringements consisted of the sharing of strategic information, on a bilateral basis, between competing asset management firms during one initial public offering (IPO) and one placing, shortly before the share prices were set. It said the firms disclosed and accepted confidential bidding intentions, in the form of the price they were willing to pay and, on occasion, the amount of shares they wanted to acquire.

As a result of this, one firm was aware of another’s plans during the IPO or placing process when they should have been competing for shares.

Commenting, FCA executive director of strategy and competition Christopher Woolard 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.”

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, therefore reducing the pressure to make bids that reflect what they really think the company is worth.

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

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