A U.K.-based fund manager that allegedly favoured an investment fund that it ran for its own employees over the fund it offered to external investors, will now pay US$101 million in restitution to those investors.
In a 2020 settlement with BlueCrest Capital Management (UK) LLP, the U.S. Securities and Exchange Commission (SEC) secured US$170 million in compensation for U.S.-based investors in the firm’s flagship fund, BlueCrest Capital International. The regulator alleged that the firm made misstatements and inadequate disclosures about the fund’s operations — including that it transferred its top traders from its fund for outside investors to an internal, proprietary fund, BSMA Ltd., and replaced the traders with an underperforming algorithm.
The firm settled the SEC’s charges, without admitting or denying the allegations, by paying US$132.7 million in disgorgement, and a US$37.3 million penalty, which was returned to investors.
Now, the U.K.’s Financial Conduct Authority (FCA) has also resolved its long-running enforcement action against the firm, obtaining US$101 million in redress for non-U.S. investors.
The FCA first made findings against the firm in 2021, but on appeal the regulator’s case for redress was struck down by the U.K.’s Upper Tribunal in 2023. In 2024, the FCA won its case in the U.K.’s Court of Appeal, which upheld the FCA’s power to require redress from firms.
Then, in January of this year, the U.K.’s Supreme Court granted BlueCrest leave to appeal the Court of Appeal’s decision, which was due to be heard in mid-November. However, the FCA noted that the proposed appeal to the Supreme Court has been withdrawn.
“This redress scheme brings a positive end to a long-running case,” said Therese Chambers, joint executive director of enforcement and market oversight at the FCA, in a release.
“BlueCrest put its own interest ahead of the external fund and provided a substandard service, which meant that investors lost out,” she added.
The FCA found that, between October 2011 and December 2015, “BlueCrest failed to manage fairly a conflict of interest created by its role in managing both an investment fund exclusively for the benefit of its partners and employees and a flagship fund available to external investors.”
That failure to deal with the conflict resulted in sub-standard service for the external fund and its investors, it noted.
“Asset managers are trusted to make decisions for their clients. It is vital they have appropriate systems and controls in place to ensure conflicts of interest are managed fairly,” the regulator said.