Release Date: 29th March 2022

To access the original FCA document, click here.

Summary

GAM International Management Limited (GIML) was fined £9,103,523 by the Financial Conduct Authority (FCA) on 29 March 2022 for breaches of Principles 2 and 8 of the Authority’s Principles for Businesses. These breaches occurred between 28 November 2014 and 8 March 2018. The fine was reduced from £13,005,033 due to an early settlement agreement. The FCA found that GIML failed to manage conflicts of interest effectively and did not conduct its business with due skill, care, and diligence.

Key Takeaways for Other Firms:

• Regular Committee Meetings:
  • Ensure committees responsible for conflict management meet regularly and fulfil their roles.
• Role Promotion:
  • Clearly promote the roles and responsibilities of Conflicts of Interest Officers and Committees to all staff.
• Board Oversight:
  • Maintain regular discussions on conflicts of interest at the Board level and conduct thorough internal audits.
• Documented Processes:
  • Implement and document due diligence processes for all investment decisions.
  • Escalate potential conflicts as per internal policies and disclose them to clients.
• Compliance and Risk Assessment:
  • Perform thorough compliance assessments to identify and manage personal financial conflicts of interest.
  • Regularly review and update compliance policies to address new risks and conflicts.

Summary of Findings:

• Deficient Conflict Management Framework:
  • GIML’s Conflicts of Interest Committee did not meet for nearly three years, and the Board had limited discussions on conflicts of interest.
  • The role of the Conflicts of Interest Officer was not sufficiently promoted, leading to ineffective conflict management.
• Specific Investment Failures:
  • Laufer 1 Investment: GIML invested £110 million in a Greensill-owned entity without proper conflict management or disclosure, despite potential incentives from Greensill.
  • SCF Fund: GIML used £423 million of customers’ funds for investments benefiting one client, failing to escalate and verify compliance with conflict policies.
  • Avenir Notes: GIML invested customers’ funds in a product while also allowing a fund manager to personally invest, leading to unaddressed conflicts and a subsequent loss of EUR 1,445,302.
• Lack of Documented Due Diligence:
  • No documented processes to consider conflict of interest issues, and inadequate disclosure to customers.
  • Insufficient documentation of due diligence for investments in Laufer, Greensill, and the Greensill Group.

In conclusion, the FCA’s action against GIML highlights the necessity for asset management firms to maintain rigorous conflict management frameworks, diligent governance, and transparent operations. Firms must ensure regular oversight, thorough documentation, and effective risk assessments to mitigate conflicts of interest and ensure regulatory compliance, thereby protecting customer interests and maintaining trust in the financial industry.