This is the largest fine ever imposed by the FSA in a conflict of interest case. In addition to the fine issued by the FSA, the Securities and Exchanges Commission (SEC) is also fining Martin Currie in the US.
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The conflict of interest arose when Martin Currie caused one client (Fund B) to enter into an ill-advised transaction which rescued another client (Fund A) from serious liquidity concerns. Both Fund A and Fund B focused on making investments in the China market, and were managed by Martin Currie from its Shanghai office.
In April 2009, Martin Currie caused Fund B to invest around GBP15 million in an unlisted bond issued by an offshore Chinese firm. According to FSA, Martin Currie failed to ensure that the bond’s valuation or the rationale behind the investment were properly scrutinized at the time of the transaction, and it proved to be a poor investment for Fund B, halving in value over the next two years.
The transaction gave rise to a clear conflict of interest between Fund A and Fund B. Martin Currie was slow to identify this point and failed to manage the conflict fairly, FSA said in a statement.
Martin Currie settled early with the FSA and received a 30% discount on its fine.
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