On November 17, the UK Financial Conduct Authority (FCA) published its final notice addressed to Mothahir Miah, a former investment analyst at a large UK institutional asset manager, fining him £139,000 and banning him from performing any function in relation to any regulated activity in the United Kingdom for at least five years. In its investigation of Mr. Miah’s trading activities leading up to the issuance of the final notice, the FCA found that Mr. Miah had failed to satisfy the FCA’s approved persons “Statement of Principle and Code of Practice for Approved Persons” (APER). In particular, Mr. Miah failed to satisfy Statement of Principle 1, which mandates that any approved person must act with integrity in carrying out his accountable functions. The FCA found that Mr. Miah had failed to act with integrity and consequently has been deemed a person who is not fit and proper to act in a function relating to a regulated activity in the UK financial services industry.
Between January 2010 and October 2012, Mr. Miah’s employment at a large UK institutional asset manager afforded him authority to trade on behalf of hedge funds and long-only funds. He exploited weaknesses in his employer’s trading systems and controls, allowing him to deliberately delay (sometimes by up to nine hours) the booking and allocation of trades in order to assess their performance and then allocate those trades that benefited from favorable intraday price movements to hedge funds that paid performance fees. He allocated trades that did not benefit from favorable intraday price movements to certain long-only funds that paid lower or no performance fees. This practice is commonly known as “cherry picking.” Mr. Miah’s actions contributed to his employer having to pay significant compensation to a number of long-only funds. The FCA’s final notice asserts that Mr. Miah knew that cherry picking was dishonest, but did so anyway in an effort to gain recognition for his trading ability from his colleagues (the FCA notes that Mr. Miah did not receive any direct financial benefit from his misconduct).
The fine (reduced from £198,600 as a result of Mr. Miah’s cooperation with the FCA investigations) and the five-year ban were imposed on Mr. Miah because the FCA considered his misconduct to be particularly serious in light of:
- his role as an experienced industry professional;
- his actions, which were deliberate and favored his personal interests over those of his employer’s customers; and
- his failure to act with integrity.
The FCA’s final notice is available here.