Ban Order, Fines on Hedge Fund Execs Upheld
The Tribunal has upheld today the Financial Services Authority’s (FSA) decision to ban and fine two hedge fund executives £2.1 million for deceiving investors and abusing the market.
The Upper Tribunal (Tax and Chancery Chamber) has alleged that Michiel Weiger Visser and Oluwole Modupe Fagbul breached Principle 1 of the FSA’s Statements of Principle for Approved Persons, which had cost £2 million on Visser and £100,000 on Fagbulu in financial penalty.
The FSA previously banned and fined Barnett Michael Alexander, a self-employed stock broker, £700,000 for manipulating the prices of shares on the London Stock Exchange.
Visser served as the CEO and Fagbulu as the CFO and compliance officer of Mercurius Capital Management Limited. Mercurius managed the hedge fund Mercurius International Fund which during the relevant period of July 2006 to January 2008 had approximately 20 investors and €35 million under management. The Fund collapsed and was placed in voluntary liquidation on 11 January 2008. Investors have, so far, recovered nothing.
Mercurius Capital Management Limited was dissolved on August 17, 2010.
Visser’s investment decisions were said to have placed the hedge fund in a precarious position, breaching the restrictions under which he was supposed to operate.
According to the FSA, Visser’s and Fagbulu’s various deceptions “concealed this from investors by actively manipulating the Net Asset Value (NAV) of the Fund by repeatedly engaging in and twice instructing Fagbulu to commit market abuse in one of those illiquid securities held by the Fund, and by causing the Fund to enter into ostensibly highly profitable but ultimately fictitious transactions.”
“Visser deliberately made or approved communications to investors which reported the manipulated NAV and contained other false information or left out relevant information including the termination of prime brokerage arrangements by two separate prime brokers,” the FSA claimed.
During the period, Visser “deliberately misled investors” by various means like engaging in market manipulation to disguise the performance of the hedge fund and to secure continued and increased investment in the Fund.
The FSA said Visser “intentionally” went beyond certain key investment restrictions limiting the risks to which the hedge fund was exposed, leaving it concentrated in very few illiquid stocks.
On the other hand, Fagbulu allegedly approved communications to investors which contained false information omitting relevant information, and failed to ensure that the hedge fund complied with its investment restrictions. Fagbulu also assisted Visser in manipulating the NAV of the Fund and committing market abuse and by entering into financing transactions which were detrimental to the Fund.
Tracey McDermott, acting director of enforcement and financial crime, said: “Visser and Fagbulu’s conduct fell woefully short of the standards required of approved persons. They showed a flagrant disregard for the interests of their investors and over a considerable period engaged in a sustained and deliberate course of deception to present a picture of the fund’s performance that was entirely false.”