FCA publishes Decision Notice against hedge fund for conflicts of interest failings

The Financial Conduct Authority has published a Decision Notice against BlueCrest Capital Management (UK) LLP (BCMUK) setting out its decision to impose a financial penalty of £40,806,700 on the firm.

BCMUK has elected to refer the case directly to the Upper Tribunal which will determine the appropriate action, if any, for the FCA to take.

The FCA considers that, between 1 October 2011 and 31 December 2015, BCMUK failed to manage fairly a conflict of interest created by allocating portfolio managers working on an external fund, open to investors outside BlueCrest, to an internal fund, open only to its partners and employees. The FCA found that BCMUK’s systems and controls did not manage the risk that portfolio managers could be allocated in a way that favoured investors in the internal fund over those of the external fund. This resulted in a sub-standard investment management service being provided to the external fund and its investors. 

The findings in the Decision Notice are provisional and only reflect the FCA’s views at this stage since BCMUK has yet to make representations. (See Note to editors 9) 

The FCA has also decided to impose a requirement on BCMUK to pay redress to clients who have suffered loss as a result of its failings. This decision has also been referred by BCMUK to the Tribunal for determination.

Notes to editors

  1. The Decision Notice (PDF)

  2. Find out more information about the Upper Tribunal (Tax and Chancery Chambers).

  3. On 8 December 2020 the SEC announced that, without admitting or denying the SEC's findings, BlueCrest Capital Management Limited had agreed to settle charges arising from inadequate disclosures, materials misstatements, and misleading omissions concerning its transfer of traders between two of its funds. 

  4. On 2 November 2021 the SEC issued its proposed plan of distribution to compensate US investors for management fees paid in connection with investments in BlueCrest Capital International Master Fund Limited’s two unregistered feeder funds, BlueCrest Capital International Limited and BlueCrest Capital L.P., between October 1, 2011 and December 31, 2015, inclusive. 

  5. The FCA would like to thank the SEC for their assistance in this matter.

  6. For the avoidance of doubt, the redress requirement imposed by the FCA seeks to redress Non-US Investors.

  7. The FCA’s Principles for Businesses

  8. Find out more information about the FCA

  9. BCMUK has used the expedited reference procedure which enables BCMUK to challenge both the Decision Notice and the redress requirement before the Tribunal without engaging the FCA’s prior internal decision-making process through the Regulatory Decisions Committee. The findings in the Decision Notice are therefore provisional and reflect the FCA’s view as to what occurred and how it considers BCMUK’s behaviour should be characterised, but are without it having received representations from BCMUK in response to its Warning Notice.

  10. The Upper Tribunal will determine, in the case of the decision to impose the Decision Notice, what, if any, is the appropriate action for the FCA to take, and will remit the matter to the FCA with such directions as the Upper Tribunal considers appropriate to give effect to its determination.

  11. In respect of the redress requirement, the Tribunal will determine whether to dismiss the reference or remit it to the FCA with a direction to reconsider and reach a decision in accordance with the findings of the Upper Tribunal.

  12. The Upper Tribunal's decisions will be made public on its website. Accordingly, the findings in the Decision Notice and the redress requirement remain provisional and the proposed action outlined in the Decision Notice as well as the separate redress requirement will not take effect pending the determination of the Tribunal.