The UK Financial Conduct Authority (FCA) has successfully obtained a compensation sum of $101 million for investors affected by issues related to a fund managed by BlueCrest Capital Management (UK) LLP. This redress is aimed at both UK investors and others outside of the US. Alongside this compensation, the FCA has issued a public censure against BlueCrest for its past practices.
The FCA’s investigation revealed that between October 2011 and December 2015, BlueCrest did not manage a conflict of interest effectively, which arose from its dual role of overseeing an investment fund meant exclusively for its partners and employees, while also handling a flagship fund accessible to outside investors. This mismanagement was highlighted by the internal decisions made by BlueCrest’s management regarding the reallocation of UK-based traders. These traders were shifted from the external fund to the internal fund, in which they had personal investments and would benefit from their decisions.
This reallocation was not disclosed adequately to investors. Many were not informed about the number of traders who had transitioned to the internal fund, which severely impacted investors’ capacity to make well-informed decisions regarding their investments. The conflict of interest undermined the level of service that should have been provided to the external fund and its investors.
It is crucial for asset managers to act in the best interests of their clients, as they are entrusted with significant financial responsibilities. Proper systems and controls must be in place to manage conflicts of interest effectively, ensuring that all investors receive equitable treatment without compromising the integrity of the investment process.
The compensation scheme set forth will be administered by BlueCrest, which will reach out to affected investors with information about the next steps. The firm may also appoint a scheme administrator to facilitate this process.