The Financial Conduct Authority has published a Decision Notice set to impose a provisional fine of £40.8m against hedge fund firm BlueCrest Capital Management (UK) LLP for conflict of interest failings.

BlueCrest has appealed and referred the case to the Upper Tribunal which will determine what action, if any, the FCA can take.

The FCA says that it believes that between 1 October 2011 and 31 December 2015, BlueCrest failed to “manage fairly” a conflict of interest.

The conflict was allegedly created by BlueCrest allocating portfolio managers working on an external fund, open to investors outside BlueCrest, to an internal fund, open only to its partners and employees. 

The FCA found that BlueCrest’s systems and controls did not manage the risk that portfolio managers could be allocated in a way that favoured investors in the internal fund over those of the external fund. 

This caused a sub-standard investment management service being provided to the external fund and its investors, the FCA said.

The findings in the Decision Notice are provisional and BlueCrest has yet to make representations. 

BlueCrest is challenging both the Decision Notice and the redress requirement via the Upper Tribunal without engaging the FCA’s prior internal decision-making process through the Regulatory Decisions Committee. 

The FCA has also decided to impose a requirement on BlueCrest to pay redress to clients who have suffered loss as a result of its failings. This decision has also been referred by BlueCrest to the Tribunal for determination.

On 8 December 2020 the SEC, the US equivalent of the FCA, announced that, without admitting or denying the SEC's findings, BlueCrest Capital Management Limited had agreed to settle charges arising from inadequate disclosures, materials misstatements and misleading omissions concerning its transfer of traders between two of its funds.