The Financial Conduct Authority has ruled that GAM’s former star fund manager Tim Haywood breached the firm’s gifts and entertainment policy when he accepted a personal trip to Sardinia on Greensill Capital’s private jet.
The FCA disclosed the breaches in notices setting out why it fined GAM and Haywood last year. The regulator announced in December that it had fined GAM £9.1mn, alongside a smaller £230,037 penalty imposed on Haywood, but did not initially release its full findings.
“Although the FCA did not find evidence that Mr Haywood made investment decisions because of these gifts and entertainment, the fact that conflicts were not properly managed heightened the risk that he may have been incentivised to invest for personal interest,” the FCA said, noting that the return flight on Greensill’s private jet was valued at £15,000.
GAM failed to ensure its systems for preventing conflicts of interest operated effectively and failed to control conflicts of interests relating to three investments, including two relating to Greensill, according to the FCA.
The collapse of Greensill Capital a year ago sparked a sprawling corporate and political scandal, engulfing scandal-prone Swiss lender Credit Suisse and former British prime minister David Cameron.
The Financial Times first revealed in 2019 that Haywood took the trip on Greensill’s private jet. Greensill’s use of private jets to woo clients came under scrutiny last year, with the FT revealing that Cameron had used the aircraft to fly to his holiday home in Cornwall.
Haywood failed on occasions “to act with due skill, care and diligence” by breaching the asset management group’s gifts and entertainment policy, the FCA said.
Haywood had told GAM in early 2018 that he had declared all relevant gifts and entertainment and complied with the firm’s policies during 2017. “These attestations were inaccurate,” the FCA said in the notice. After GAM began an internal probe, Haywood disclosed the Sardinia flight, flights on a Greensill aircraft for business trips relating to Greensill assets, and attendance at a charity dinner at Buckingham Palace.
“I am very sorry for the things that I got wrong, with my failings described in the FCA summary. I have taken on board key lessons, and will strive to be a better investment manager in the future”, Haywood said on Wednesday.
“I believe that the investment decisions taken by [GAM], and by me on [GAM]’s behalf, were indeed taken in the best interest of clients,” he said, adding that “every Greensill-related bond paid every sum due, on time and in full, during my employment at GAM”.
The FCA found that Haywood, who invested more than £1.5bn of client money into Greensill-linked assets, had “failed to take reasonable steps to ensure that [GAM] fairly managed conflicts of interest issues” from two Greensill investments.
In one of the transactions, GAM’s funds lent around £110mn to Greensill, via a special-purpose vehicle called Laufer, named after a creek on the financier’s family watermelon farm in Australia.
The FT reported this week that Greensill also offered GAM an equity warrant and the potential for extra fees on another fund. The FCA ruled that these “potential incentives” created a conflict of interest between GAM and its clients.
“As a result of there being a potential benefit to [GAM] itself in supporting the financial health of Greensill, there was an incentive for [GAM] to invest its clients’ funds in Laufer 1 for its own benefit,” the FCA said, noting that the Laufer deal was “financially beneficial to Greensill” and refinanced its debts “on more favourable terms”.
