UK FCA Orders BlueCrest Capital Management to Pay a Fine of £40.8M

The UK Financial Conduct Authority (FCA) announced on Wednesday that it has imposed a £40,806,700 fine on BlueCrest Capital Management (UK) LLP (BCMUK), and ordered the company to pay redress to clients who have suffered loss as a result of its failings.

As detailed in the official announcement, 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 regulator 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.

Notably, the findings are provisional and only reflect the FCA's views at this stage since BCMUK has yet to make representations. 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.

Let's recall that, in December 2020, the US Securities and Exchange Commission (SEC) has ordered BlueCrest Capital Management Limited to pay $170 million, which will be distributed to harmed investors. The SEC penalty was more than three times the FCA's.

The company has agreed to pay the penalty in order to settle charges arising from inadequate disclosures, material misstatements, and misleading omissions concerning its transfer of top traders from its flagship client fund, BlueCrest Capital International (BCI), to a proprietary fund, BSMA Limited, and replacement of those traders with an underperforming algorithm.