BRITAIN'S investment watchdog yesterday punished companies in the Robert Fleming group for rule breaches, with fines totalling £700,000.
At the same time Hong Kong authorities secured voluntary compensation of nearly £20 million from a company jointly owned by the Jardine Matheson and Robert Fleming groups.
Britain's IMRO (the Investment Management Regulatory Organisation) handed down a £400,000 fine to Robert Fleming Asset Management (RFAM) and £100,000 penalties to three other firms in the group, while Hong Kong's SFC (Securities and Futures Commission) agreed the compensation package.
Failings exposed by the investigation were accepted by Robert Fleming Asset Management, which regretted the breaches.
"We are embarrassed by it, there's no doubt about that," said Mr Paul Bateman, RFAM's chairman.
The disciplinary action resulted from a five month joint investigation by IMRO and the SFC into dealing procedures at Jardine Fleming Investment Management (JFIM) and related companies, with the co operation of all the firms involved.
JFIM is a member of the Jardine Fleming group.
The probe revealed Mr Colin Armstrong, a former senior fund manager and director of JFIM had engaged in late allocation of deals after changes in the price of the instruments traded.
His actions had resulted in three accounts managed by JFIM losing money and led to the group agreeing to make voluntary payments totalling £19.3 million to compensate these clients.
Mr Armstrong made "substantial profits from trading in Japanese exchange traded options" for his own account, the SFC said. He has since cooperated With JFIM and had paid back any gains.
"The heart of the problem is JFIM. The weakness was their back office and procedures were not up to IMRO standards," said Mr Bateman, adding the problem had been isolated to one fund manager, but said it had exposed systemic weakness.
With hindsight he acknowledged that these procedural and compliance monitoring problems could and should have been spotted earlier but said it was difficult to tell how much quicker it could have been dealt with, although there had been a steady increase in the management response.
Mr Armstrong's behaviour had been an abuse of trust, but no decision had yet been made over whether it would result in court action, he said.
He said Mr Armstrong had accepted the SFC termination of his registration as an investment adviser and securities dealer. Apart from fining the Robert Fleming subsidiaries that had delegated fund management of £1.2 billion to JFIM, IMRO ended the registration of Mr Robert Thomas, the former chief executive of JFAM and JFIM, who accepted he "bore ultimate responsibility for the compliance failures in the companies".
But IMRO denied the penalties were insufficient either as punishment or a deterrent against future breaches.
"It always sends out a message to others when we take out a disciplinary action," an IMRO official said, adding the fines matched the scale of the breaches and the negative publicity would also have an effect.
Mr Bateman said the Robert Fleming group would be in close contact with all of its clients, but said he did not expect any material loss from the findings and clients had so far been "understanding of the position".
