Ex-fund manager fined over IPO misconduct [updated]
A former fund manager has been fined £32,200 (€36,600) for attempting to influence other managers in relation to the pricing of two initial public offerings (IPO) in 2015.
According to a statement from the Financial Conduct Authority (FCA), Paul Stephany, formerly of Newton Investment Management, contacted fund managers at other companies and “attempted to influence them to cap their orders at the same price limit as his own orders”.
The regulator said Stephany’s actions “risked undermining the integrity of the market”, adding that the fund manager had “acted without due skill, care and diligence”.
In September 2015, the FCA reported, Stephany had emailed managers at 11 other companies suggesting a price level for initial shares in travel agent On The Beach Group. In July he had contacted two managers by phone with similar suggestions about the pricing of real estate company Market Tech Holdings.
In its final notice on the case, the FCA stated that the “proper price formation process” at IPOs required investors to submit orders “based on their own valuations, rather than using their collective power to influence the share price”.
Stephany argued in response that there was “no clear distinction” between information sharing and influencing, and the IPO process was “much more complex” than depicted by the regulator.
Stephany ran two UK equity funds at Newton, as well as overseeing mandates for the Johnson & Johnson UK pension scheme and the Merseyside Pension Fund. During the period in question he was in charge of roughly £1.8bn.
He became inactive on the FCA’s register of approved persons in October 2015, and is currently listed on his LinkedIn page as a business consultant to sell-side firms.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “This matter underscores the importance of fund managers taking care to avoid undermining the proper price formation process in both IPOs and placings.
“These markets play a vital role in helping companies raise capital in the UK’s financial markets and when they are put at risk the FCA will take action.”
A spokesperson for Newton said: “It is not our policy to comment on matters relating to former or current employees; however, Newton IM has been co-operating fully with the FCA and will continue to do so until it reaches its conclusion.”
Newton is one of four asset managers currently under investigation by the FCA regarding potential breaches of UK competition law, relating to the pricing of IPOs and placings. However, the regulator said this was separate to the case involving Paul Stephany.
This article was updated on 5 February 2019 to add a statement from Newton Investment Management.