A Final Notice reveals that the FSA has fined Martin Currie Investment Management Ltd (MCIML) and Martin Currie Inc (MCI – together Martin Currie) for failing to properly manage a conflict of interest. Both MCIML and MCI’s UK branches are FSA authorised and are both registered with the SEC as investment advisers.
The matter concerns two funds which the FSA refers to as “Fund A” and “Fund B” (or which the SEC refers to as the Martin Currie China Hedge Fund LP and its U.S. registered investment company client The China Fund Inc).
In brief, “Fund B” invested £15M in an unlisted bond, which halved in value over the next two years. On the other hand, “Fund A” was having liquidity problems due in part to its exposure to illiquid investments. It transpired that of the proceeds of Fund B’s investment in the bond, half of the proceeds were used to repay these illiquid investments which helped alleviate Fund A’s liquidity problems.
The firm was subject to a financial penalty of £3.5M. Under separate action by the SEC, Martin Currie has been fined $8.3M.
