Fleming firms fined pounds 815,000 by regulators

Humiliation for Hong Kong investment house as Save & Prosper is rapped for UK rule breaches
Jardine Fleming Asset Management, one of the most respected Hong Kong investment houses, was yesterday fined pounds 400,000 by its regulator and ordered to pay more than pounds 12m compensation for failing to control the rule-breaking activities of one of its fund managers.

Imro, the fund mangers' regulator, also fined three fund managers in London, part of Robert Fleming, Jardine Fleming's shareholder, a further pounds 300,000 for their part in the failure.

Jardine Fleming suffered the further humiliation of seeing its chief executive, Robert Thomas, barred from ever acting in a fund management capacity again after he admitted that he bore "ultimate responsibility" for what took place.

In a separate development, Save & Prosper Equity Managers, the personal equity plan subsidiary of Robert Fleming, was fined an additional pounds 115,000 and ordered to pay pounds 100,000 compensation for rule breaches in the UK.

Compensation in Hong Kong was ordered by the Securities & Futures Commission, the colony's regulator.

The fines announced yesterday are among the largest to be levied against any financial institution, rivalled only by Imro's pounds 750,000 punishment of Invesco in 1990 for its part in the Robert Maxwell pension scandal and a similar fine against Sedgwick in the same year.

Phillip Thorpe, chief executive at Imro, said: "Other firms would be well advised to review their own arrangements relating to delegated functions."

Henry Strutt, managing director of Jardine Fleming Holdings, in which Jardine and Robert Fleming hold a 50 per cent stake, said: "This has been a painful experience for our group. We very much regret the regulatory breaches."

The failings exposed by the five-month Imro and SFC investigation were also accepted by Robert Fleming Asset Management, which said it regretted the breaches.

Paul Bateman, chairman of the company, said: "We are embarrassed by it, there's no doubt about that."

The disciplinary action resulted from a five-month joint investigation by Imro and the SFC into dealing procedures at Jardine Fleming Investment Management (JFIM) and related companies.

The probe revealed that Colin Armstrong, a former senior fund manager and director of JFIM had engaged in late allocation of deals after changes in the price of the instruments traded had occurred, the SFC said.

His actions had resulted in three accounts managed by JFIM losing money and led to the group agreeing to make voluntary payments totalling $19.3m to compensate these clients.

Armstrong made "substantial profits from trading in Japanese exchange traded options" for his own account, the SFC said.

Mr Bateman said yesterday that the problem was initially spotted by Jardine Fleming Investment Management in late 1994. It noticed a number of questionable trades carried out by Mr Armstrong. He was unable to fully explain what had taken place.

Part of his activities were related to the management of a small Jardine trust, the Ninja fund, which he managed on behalf of some institutions and individuals.

Investigators found that Mr Armstrong's malpractices centered on Japanese stock exchange traded options .

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