Record fine for fund manager

ITALIAN executive Alberto Micalizzi, whose hedge fund racked up hundreds of millions of dollars of losses in the credit crisis, has been fined £3m by Britain’s financial watchdog.

ITALIAN executive Alberto Micalizzi, whose hedge fund racked up hundreds of millions of dollars of losses in the credit crisis, has been fined £3m by Britain’s financial watchdog, its largest fine for an individual in a case not related to market abuse.

The Financial Services Authority also said yesterday the CE of London-based Dynamic Decisions Capital Management (DDCM) was not fit and proper to perform any role in the regulated financial services industry.

Mr Micalizzi was fined £3m for failing to ensure that his business was run soundly and prudently.

In the authority’s view, Mr Micalizzi lied to investors to try to hide “catastrophic losses” of more than $390m, about 85% of the value in the DDCM master fund, in 2008.

A separate investigation into Mr Micalizzi’s fund, called DD Growth Premium, revealed last August that its main investment — $500m of highly illiquid bonds — had been issued by a company in a trailer-park suburb of Phoenix, whose head was on the run from US authorities.

It was also found that the bonds he bought were backed by a global network of shell firms that included a Spain-based charity, the International Charitable Christian Fund.

The Financial Services Authority said Mr Micalizzi had tried to frustrate its investigation by repeatedly providing false and misleading information.

“(His) conduct fell woefully short of the standards investors should expect and behaviour like his has no place in the financial services industry,” Tracey McDermott, the watchdog’s acting director of enforcement and financial crime, said.

Mr Micalizzi and DDCM company had referred the case to the Upper Tribunal, where they would have a chance to appeal against the ban and fine, according to the watchdog.

He is also under investigation in Italy where, last year, police raided two of his properties and launched a fraud investigation into his dealings there.

The British authority believes that he

In the Financial Services Authority’s view, Micalizzi lied to investors to try to conceal ‘catastrophic losses’ of more than $390m

entered into a number of contracts for the purchase and resale of a fictitious bond used to create artificial gains for his fund. The bond contracts were sold to the fund at a deep discount to face value but Mr Micalizzi is judged to have revalued them at approximate face value when reporting to investors, booking purported profit of more than $400m in 2008 to counterbalance the fund’s losses, the authority said.

In one example, after he provided false and misleading information to conceal the true value of the fund, a new investor put $41,8m into it in December 2008. Mr Micalizzi’s fund, which had attracted investors such as RMF, part of Man Group, and whose directors included Michael Nobel, great-grandnephew of the founder of the Nobel Prize, was put into liquidation in the spring of 2009.

The fund’s liquidator estimated the fund’s assets on liquidation were worth about $10m. Investors had not yet received anything from the liquidator, the regulator said.

Jonathan Crook, partner at law firm Eversheds, said the case raised questions about the quality of an earlier probe launched by Britain’s Serious Fraud Office, which dropped its criminal investigation into DDCM in 2010 citing a lack of evidence.

“The FSA is not a fraud prosecutor and has therefore taken steps to discipline Micalizzi in accordance with its statutory powers. But it all rather begs the question: why Micalizzi was not prosecuted for fraud by the Serious Fraud Office,” he said.

The regulator said last year it would target high-profile individuals and has since fined Greenlight Capital chairman David Einhorn £3,6m and JPMorgan Chase mining adviser Ian Hannam £450 000 pounds in separate-market abuse cases. Reuters, Bloomberg