On May 29, the UK Financial Services Authority (FSA) announced that it had decided to fine Alberto Micalizzi £3 million (approximately $4.6 million) and ban him from performing any role in regulated financial services for not being fit and proper. This is the largest fine imposed by the FSA on any individual in any case other than a market abuse case. Micalizzi was the chief executive officer and a director of Dynamic Decisions Capital Management Ltd (DDCM), a hedge fund manager. The FSA also announced that it had cancelled DDCM’s permission to carry on regulated business. The FSA’s decisions have been appealed to the Upper Tribunal.
According to the FSA Decision Notices, between October 1, 2008 and December 31, 2008, the master fund managed by DDCM (the Fund) lost approximately 85% of its value. The FSA found that to conceal the losses, Micalizzi lied to investors about the true position of the Fund and, in late 2008, entered into a number of contracts, on behalf of the Fund, for the purchase and resale of a bond (the Bond Contracts). The FSA considered that the bond was not a genuine financial instrument and that Micalizzi was aware of this when he entered into the Bond Contracts which accordingly were deliberately undertaken by Micalizzi to create artificial gains for the Fund. (Units of the bond were sold to the Fund at a deep discount to their face value, and then valued by the Fund at approximately their face value when reporting to investors.) The Fund was placed into liquidation in May 2009.
The FSA also found that during the course of its investigation Micalizzi repeatedly provided it with false and misleading information.
The FSA found Micalizzi to have breached Principle 1 of its Statement of Principles and Code of Conduct for Approved Persons (APER) under which approved persons are required to act with integrity.
The FSA cancelled the permission of DDCM to conduct regulated business for (1) failing to satisfy the threshold conditions under the Financial Services and Markets Act 2000 and the rules of the FSA with respect to such permission; (2) not being fit and proper as it had failed to ensure that its business was conducted soundly and prudently and in compliance with proper standards in breach of Threshold Condition 5 (suitability).
In November 2011 in a related case (as reported in the December 9, 2011 edition of Corporate and Financial Digest) the FSA banned and fined the compliance officer of DDCM.
Tracey McDermott, the FSA’s acting director of enforcement and financial crime, said: “Alberto Micalizzi’s conduct fell woefully short of the standards that investors should expect and behaviour like his has no place in the financial services industry and we are committed to tackling it wherever we find it.”
For more information regarding Micalizzi, click here. For more information regarding DDCM, click here.