Prudential censured over failed bid for AIA

 

Prudential's Tidjane Thiam has become the first chief executive of a FTSE 100 company to be censured by the Financial Services Authority, for misconduct during the insurer's failed takeover of AIA in 2010.

The City regulator said Prudential had failed to tell the watchdog it planned to launch a $35.5bn (£23.4bn) bid for its Asian rival.

Along with the censure, Prudential was fined £30m because it "failed to deal with the FSA in an open and co-operative manner".

The first the regulator heard about the deal was when it was leaked to the media on 27 February 2010. Prudential had been working on it since October 2009, and contacted the chief executive of AIG, AIA's owner, in December of that year. The FSA said Prudential ignored advice from its adviser, Credit Suisse, to inform the regulator.

Tracey McDermott, the FSA's director of enforcement and financial crime, said: "Prudential, led by Thiam as chief executive, failed to give due consideration to its obligation to inform the FSA of this transaction, which would have had a huge impact on the group had it gone through.

"That was a serious error of judgement for which Prudential is paying the price. This case should send a clear message to all board members of their collective and individual responsibility for the decisions they make on behalf of their companies."

Prudential scrapped the deal in June 2010 because shareholders would not back it. The failure left it with a £377m bill and contributed to the departure of the chairman, Harvey McGrath, who was not reprimanded by the FSA.

The censure and fine are believed to have been issued after more than a year of talks between Prudential and the regulator. It is believed the FSA had been seeking a fine of up to £80 million.

Both are highly embarrassing for the company and its 50-year-old boss. According to the documents, not only did Thiam, pictured, withhold information from the FSA at a routine meeting between the two parties weeks before the leak, Prudential's board also considered that the FSA "might be the cause of a leak".

Paul Manduca, Prudential's chairman, said the company wished to "draw a line under the matter".

"Tidjane acted at all times in the interests of the company and with the full knowledge and authority of the board," he said.

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