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Financial trading group XTX Markets is taking legal action against investment managers Aviva and Legal & General for alleged discrimination over their refusal to allow it to put cash in some of their funds after last year’s invasion of Ukraine because the firm’s owner was a Russian citizen.
London-based XTX is majority-owned by Russia-born billionaire Alexander Gerko, who has lived and worked in the UK since 2006 and is not the subject of international sanctions, according to copies of the legal claims seen by the Financial Times.
At the outbreak of the Russia-Ukraine war in 2022 and at the time when the companies refused to work for XTX, Gerko was a dual Russian and British citizen. He later renounced his Russian citizenship, XTX said.
XTX, one of the world’s biggest proprietary trading and market-making groups, had sought to use Aviva Investors’ and L&G Investment Management’s money-market funds to invest some of its own cash.
XTX, which reported £1.1bn profit from its UK entities last year, alleges that their refusal to provide services to it amounted to discrimination based on its owner’s race.
Aviva Investors said it would defend the claim but declined to comment further. LGIM declined to comment but said in its defence document that it had not discriminated against XTX.
The cases, which have been brought in the Central London County Court, shine a spotlight on the risks to companies of taking a “cautious” approach to accepting work that they perceive carries a risk of breaching international sanctions. Breaching sanctions can result in hefty financial or custodial penalties.
XTX is seeking court declarations that Aviva Investors and LGIM each breached the UK Equality Act by declining to provide services to the company because of Gerko’s Russian citizenship. XTX has not asked the court to award damages.
Gerko, a former Deutsche Bank trader and one of the UK’s wealthiest people, has publicly criticised Russia’s war in Ukraine. His company committed tens of millions of pounds to charities working in Ukraine.
He was the UK’s biggest taxpayer last year, according to the Sunday Times. He became a British citizen in 2016, according to the claims.
XTX said in its legal claims that it had told Aviva and LGIM that it should not be refused access to their funds because neither the company nor Gerko were based in Russia.
“Some companies are refusing to deal with Russian-owned businesses rather than correctly interpret sanctions regulations or perform effective due diligence,” said Sunil Samani, XTX Markets’ co-head of legal, in a statement.
“We are taking legal action, not to seek any financial redress, but to highlight such discrimination and to set a precedent to assist others who have been, and continue to be, subject to the same treatment.”
According to the claim against LGIM, the company told XTX it was taking an “extremely cautious approach” to sanctions compliance and had a “conservative stance” on whether to provide services to it.
A LGIM employee emailed XTX in June 2022 saying that it was “currently not onboarding any new clients where there are Russian nationals within the ownership structure”, according to the claim.
In its defence, LGIM said some of its statements had been summarised inaccurately in the claim and denied stating that it was taking a “conservative stance” towards XTX generally.
LGIM said in its defence that it had apologised for the emails, which were not an accurate reflection of its position, and had later sent a detailed explanation to XTX.
LGIM had provided other services to XTX and the trading group’s claim was outside the scope of the Equality Act because it related to an application to invest in an Irish entity, the defence added.
The claims against Aviva and LGIM mirror a similar case brought by XTX against accounting firm Mazars last year, after it allegedly refused to provide payroll services. Mazars declined to comment but people with knowledge of the case said it was defending the claim.
Additional reporting by Jane Croft in London
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