FCA Secures $101 Million Redress for BlueCrest Investors Over Conflict of Interest Failings

The UK’s Financial Conduct Authority (FCA) has secured US$101 million in compensation for UK and other non-US investors in a fund sub-managed by BlueCrest Capital Management (UK) LLP (BlueCrest), following a long-running investigation into the firm’s conflict of interest failings. The regulator has also issued a public censure against BlueCrest.

According to the FCA, between October 2011 and December 2015, BlueCrest failed to fairly manage a conflict of interest arising from its management of two investment funds, one reserved exclusively for its partners and employees, and another offered to external investors.

BlueCrest’s management reportedly approved the transfer of UK-based traders from the external fund to its internal fund, in which they held personal investments and stood to gain directly from performance. The FCA said these actions created an unfair advantage for BlueCrest insiders at the expense of external investors.

The watchdog noted that disclosures to investors were “insufficient and, at times, misleading,” as investors were not informed that a significant number of traders had been reassigned to the internal fund. This lack of transparency, the FCA said, hindered investors’ ability to make informed decisions about their investments.

The regulator added that BlueCrest’s failure to manage the conflict fairly resulted in a substandard service for the external fund and its investors. “Asset managers are trusted to make decisions for their clients,” the FCA said. “It is vital they have appropriate systems and controls in place to ensure conflicts of interest are managed fairly.”

Therese Chambers, Joint Executive Director of Enforcement and Market Oversight at the FCA, commented “This redress scheme brings a positive end to a long-running case. BlueCrest put its own interest ahead of the external fund and provided a substandard service, which meant that investors lost out.

After many years of legal challenge, the FCA has now successfully secured a substantial US$101 million for affected investors.”

The redress scheme will be overseen by BlueCrest, with the FCA confirming that affected investors will be contacted directly either by the firm or by an appointed scheme administrator regarding the next steps.