FCA fines investment house over Premier Oil short disclosure
Fined £873,118 for failing to disclose position
The Financial Conduct Authority (FCA) has fined Hong Kong-based investment firm Asia Research and Capital Management (ARCM) £873,118 over a failure to disclose a short position held against Premier Oil built between February 2017 and July 2019.
Under rules introduced in 2012, firms are required to notify the FCA and disclose to the public details of net short positions held. ARCM was found to have failed to make 155 notifications of its net short position to the regulator and 153 disclosures of its net short position to the public.
Transparency Task Force publishes FCA 'wish list'
The privately owned asset management firm founded in 2011 manages a series of long duration closed-ended investment vehicles, focused primarily on investing in debt and equity securities across Asia.
By July last year, ARCM had built a net short position equivalent to 16.9% of Premier Oil's issued share capital via equity swaps, with the firm holding that position for 106 days before notifying the FCA and the public.
At the time, the position was the largest net short ever held in an issuer admitted to the FCA's Official List, with shares admitted to trading on the Main Market of the London Stock Exchange.
The FCA said ARCM's failures to comply with its regulatory obligations were "multiple and occurred over a long period of time".
However, owing to the firm's cooperation with the FCA, ARCM qualified for a 30% stage discount under the regulator's executive settlement procedures and therefore swerved a financial penalty of £1.2m.
ARCM declined to comment but a source close to the company said the firm was "mistaken" in its belief that derivatives were exempt from short disclosure rules, and has now taken steps to ensure the requirements will be complied with in the future.
The source also noted that the market was "generally aware" of a total short equity position in Premier Oil of around 25%, despite not being aware of ARCM's short position.
Concept stocks: An opportunity for short sellers
Commenting on the fine, FCA executive director of enforcement and market oversight Mark Steward said: "Failure to report disclosable short positions undermines the integrity and efficiency of financial markets.
"ARCM repeatedly breached reporting rules and failed to provide important information to us and to the market. This fine reflects the seriousness of these breaches."
More on Regulation
Most read
