The UK’s Financial Conduct Authority has fined Swiss fund group GAM and its former star fund manager Tim Haywood, following a scandal that rocked the firm and centred on debt tied to metals magnate Sanjeev Gupta and Australian financier Lex Greensill.
The regulator said on Thursday that it had fined GAM £9.1m for failing to manage conflicts of interest, while Haywood faced a penalty of £230,037 for failing to manage conflicts of interest and breaching GAM’s gifts and entertainment policy.
The investigation began after one of Haywood’s close colleagues, Daniel Sheard, made a series of allegations to the regulator in March 2018. Sheard had become concerned about the scale of Haywood’s purchases of bonds tied to Gupta, as well as his relationships with the industrialist and with Greensill, whose eponymous supply chain finance group collapsed this year.
The Financial Times revealed in 2019 that Haywood had flown on one of Greensill’s private planes on a number of occasions, including a flight with his wife to the Mediterranean.
The scandal, which engulfed GAM, become public in July 2018 when the group suspended Haywood, initially with little public explanation. In response, investors in his Absolute Return Bond funds quickly sought to get their money back, forcing GAM to suspend and then liquidate the funds.
GAM’s then-chief executive Alexander Friedman stepped down later in 2018 as shares in the once high-flying asset manager tumbled and it struggled to stem heavy client outflows.
The FCA said it had fined GAM International Management Limited for “failing to conduct its business with due care, skill and diligence” by not having systems in place to prevent conflicts of interest between November 2014 and October 2017, and for failing to control conflicts of interest linked to three investments between October 20 2016 and March 2018. It did not give further detail.
Haywood was fined £230,037 for not taking “reasonable steps” to comply with conflict of interest rules between October 2016 and November 2017, and failing to comply with GAM’s gifts and entertainment policy between March 2017 and January 2018. Both fines reflect a 30 per cent discount because GAM and Haywood co-operated.
Gupta, once hailed as the “saviour of steel”, relied on billions of dollars of financing from Greensill to build a global empire of metal plants and smelters over the past decade. Greensill’s collapse in March plunged Gupta’s empire into crisis.
Greensill is now under a separate investigation by the FCA. The Serious Fraud Office has launched an investigation into suspected fraud, fraudulent trading and money laundering at Gupta’s businesses.
GAM first invested in bonds from a company related to Greensill called Laufer Limited on October 20 2016, according to documents seen by the FT. Laufer, named after a creek on Greensill’s family farm, then sent on the funds to Greensill Capital.
Among the illiquid paper that Haywood bought were Greensill bonds funding Gupta’s acquisition of smelting and hydroelectric operations at Lochaber in Scotland. In November, the FT revealed that the Scottish government had provided a £586m guarantee to Gupta’s business.
Peter Sanderson, GAM’s chief executive, said: “We fully accept the findings of the FCA and acknowledge the conflicts of interest shortcomings which occurred at the firm between late 2014 and early 2018.”
The asset manager said in August 2018 that its own investigation had found Haywood may have failed to perform sufficient due diligence, and may also have breached company policy requiring contracts to be signed by two people. It said he broke rules on receiving gifts and entertainment and used his personal email for work purposes.
Haywood was sacked from GAM in early 2019 after an internal investigation found “gross misconduct”. GAM said “there was serious failure to achieve the standard of skill and care which were to be expected of someone in his position”.
At the time, Haywood said he disputed “many of the findings” of the probe and that he was being treated unfairly and made a “scapegoat”, noting that “the majority of allegations have been dropped”. In May 2019, he flew to GAM’s annual general meeting in Zurich but was blocked from entering.
In a statement on Thursday, Haywood said: “I am glad to resolve this matter after such a long time. I am truly sorry for the mistakes that I have made and I have learnt a series of very important lessons.”
He added: “I now look forward to returning to an active role in the industry and will make my plans public in due course.”