The UK’s Financial Conduct Authority has resumed its legal battle with Michael Platt’s hedge fund-turned family office BlueCrest Capital Management, following a significant court loss regarding a $700m compensation demand for investors, according to a report by Bloomberg.
Last year, BlueCrest successfully contested the FCA’s demand to compensate investors, which stemmed from allegations that the firm had favoured partners in an internal fund. The tribunal’s ruling was a setback for the regulator, with the judge stating that the FCA lacked the authority to impose such requirements on a single firm and criticising the regulator’s “muddled thinking”.
On Tuesday, the FCA’s lawyers appealed the tribunal’s decision, arguing that the judge had imposed “complex and unnecessary” conditions. The FCA’s investigation alleged that BlueCrest allocated portfolio managers to an internal fund, exclusively accessible to its employees, thus creating conflicts of interest, allegations which BlueCrest denies.
The FCA’s provisional report claimed that BlueCrest’s failure to manage these conflicts led to a “sub-standard” service for the external fund and its investors, who paid “excessive” management and performance fees. The regulator also imposed a £40m fine on the firm.
After stating that its intended to “defend its position vigorously”, BlueCrest bypassed the FCA’s internal regulatory panel, opting to challenge the findings directly in court.
In the US, BlueCrest agreed to pay $170m to former clients — one of the largest penalties ever imposed by the US Securities and Exchange Commission against a hedge fund. The SEC stated that BlueCrest had failed to act in the best interests of its investors.
