UK regulator the FCA has found that three asset management firms have breached competition law.  It is the first time the FCA has used its competition enforcement powers.

The firms involved are Hargreave Hale, Newton Investment Management and River and Mercantile Asset Management.

The infringements consisted of sharing confidential information during one IPO and one share placing shortly before the share price was set.

The firms disclosed and/or accepted otherwise confidential bidding intentions such as the price they were willing to pay for the stock and the volume.

This allowed one firm to know another’s plans during the IPO or placing process when in reality they should be competing for shares.

By sharing what is meant to be confidential information, it undermines the process by which prices are set. This could have a detrimental effect on the issuing company as managers are under less pressure to make bids that reflect what the company is truly worth.

Companies use IPOs and placings to finance investment so by exchanging confidential information it could reduce the share price achieved by the company thereby raising the cost of equity capital.

The FCA fined Hargreave Hale £306,000 and River and Mercantile £108,000. The FCA has not imposed a fine on Newton as it was given immunity under the competition leniency programme.

Christopher Woolard, executive director of strategy and competition at the FCA said: “This is our first case using our competition law powers and demonstrates our commitment to taking enforcement action to protect competition.

“Asset management firms must take care to avoid undermining how prices are properly set for shares in both IPOs and placings. Failure to do so risks them acting illegally. The FCA will act when markets that play a vital role in helping companies raise capital in the UK’s financial markets are put at risk. We can also take regulatory action against an individual and did so here with respect to some of the same facts.”