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Disgraced Financier Fined £2.7 Million

In a spectacular fall from grace, a once respected and highly successful financier, who resorted to dishonesty in a bid to stem the catastrophic tide of losses after the credit crunch bit, has been fined £2.7 million and banned from his profession.

The financier was chief executive officer of a capital management firm which ran a fund which was marketed to investors as low risk, highly liquid and market neutral. In the final quarter of 2008, however, the fund suffered devastating losses, amounting to about 85 per cent of its net asset value.

Faced with that crisis, the financier arranged for the fund to acquire units with a face value of $700 million in a convertible bond which was said to be backed by Russian diesel worth $10 billion. The practically worthless bonds were in fact ‘not genuine’ and, when the truth emerged, the fund was forced into liquidation.

The Financial Conduct Authority (FCA) referred the matter to the Upper Tribunal (UT), which found that, although the financier was unaware that the bonds were bogus when they were acquired, he was ‘indifferent’ as to whether or not they were genuine. That reckless conduct was compounded by his dishonest attempts to mislead the fund’s liquidators, the FCA and the UT.

Fixing his penalty at £2.7 million, the UT found that, despite his previously blameless record, his actions had caused considerable losses to investors and his misconduct was ‘at the most serious end of the scale’. The dishonesty and lack of integrity that he had exhibited inevitably led to the UT’s finding that he was ‘not a fit and proper person’ to carry on regulated activities.