Ex-BlackRock fund manager given jail time; Goldman Sachs hit with US$120 mln penalty

PUBLISHED : Thursday, 22 December, 2016, 1:11am
UPDATED : Thursday, 22 December, 2016, 1:11am

A former star fund manager in the London office of asset manager BlackRock on Wednesday was sentenced to 12 months in jail after pleading guilty to two counts of insider dealing.

Mark Lyttleton, 45, admitted buying shares in EnCore Oil and Cairn Energy ahead of public announcements from both firms, after hearing privileged information from colleagues.

The Financial Conduct Authority, Britain’s markets regulator, said he made a net profit of about 35,000 pounds by buying the two stocks through an overseas asset manager trading on behalf of a Panamanian-registered company.

Lyttleton is one of the highest-profile figures to be sentenced in Britain for insider trading. His funds were popular with investors during the financial crisis after he posted positive returns. At the peak he personally managed assets worth about 4.5 billion pounds (US$5.6 billion).

Judge Andrew Goymer said an extraordinary aspect of the case was that Lyttleton was already wealthy, he was under no financial pressure and the gains were small relative to his overall earnings.

“It is inexplicable that he should have thrown all of this away in the conduct that he did,” he said. “The defendant had no need for the money because he was earning a good income.”

Separately, Goldman Sachs will pay a $120 million penalty to resolve civil charges that it attempted to manipulate a global benchmark for interest rate products known on Wall Street as “ISDAFIX,” US derivatives regulators said Wednesday.

The case against Goldman Sachs, brought by the Commodity Futures Trading Commission, was the latest in a series of broad investigations into manipulation by big banks of a variety of global benchmark rates.

To date, the CFTC has imposed penalties of over $5.2 billion stemming from these probes, which include Libor and Euribor, foreign exchange benchmarks, and the US Dollar International Swaps and Derivatives Association Fix, or USD ISDAFIX.

A number of banks have also resolved parallel criminal charges related to the manipulation of various global benchmarks.

Goldman Sachs, which was also accused by the CFTC of making false reports on the benchmark rate, will settle the case without admitting or denying the charges.

“We are pleased to have resolved these matters and have already taken steps to enhance our policies and procedures,” bank spokesman Michael DuVally said in a statement.

ISDAFIX rates are used to help value the cash settlement of options on interest rate swaps and other products. Pension funds and local governments often rely on products priced off the benchmark rate to help hedge against future interest rate changes.

The CFTC said that emails and audio recordings showed traders at Goldman discussing their plans to try to move the benchmark rate in directions that benefited their own positions.

They tried to skew the bank’s submissions used to help come up with the “print,” or the reference rate that is captured each day at 11 am, the CFTC said.