The Mail on Sunday
An arrogance exceeded only by foolishness
ONCE again we have seen how too many City superstars think the rules are just for the little people. Sadly, this has been shown by some individuals at a firm whose reputation had been spotless.
I am referring to fund manager Gartmore, where Guillaume Rambourg, the joint head of its top fund, has been suspended for breaking internal rules.
The effect on Gartmore’s shares has been massive. Having listed at 220p in December, they closed last week at 141p, though this is mercifully much higher than Wednesday’s 97p low.
Rambourg has not broken any FSA rules. But he directed traders to use specific brokers when executing trades, going against Gartmore’s rules forbidding such guidance from a fund manager.
The situation was not helped by Rambourg’s co-chief and Gartmore’s star name, Roger Guy, who defended his colleague and declared the rules were silly. He later took a more considered view, but the cat was out of the bag.
Here we have a pair of supposed wizards revealed as egotists with no respect for their company’s rules, and in Rambourg’s case a willingness to break them.
Fund management firms, like all money managers, are these days required to make sure that they get ‘best execution’ for clients. In other words, they must seek out a combination of the best prices and the lowest dealing costs.
It is said that Rambourg’s preference for some brokers never put this best execution at risk. That may prove to be true, but Gartmore’s rules were presumably intended to set up some practices that, if adhered to, would ensure no fund manager could abuse his position.
Rambourg apparently set himself above this rule. Guy appeared at least at first to condone that attitude and behaviour.
The arrogance of this attitude is exceeded only by its foolishness. In this post-Enron, post-Madoff era, the consumers of financial services are a nervous crowd, constantly wary of incompetents and crooks. Any sensible professional should seek to be not just honest, but above suspicion.
The error of Rambourg’s ways is even greater when seen in the light of a ruling by Italy’s financial watchdog, which, it emerged last week, has fined him £270,000 for market abuse that allegedly took place in 2006.
He denies wrongdoing and Gartmore is challenging the fine for him. But it beggars belief that anyone living under the shadow of such an allegation, even if illfounded, should then ignore his firm’s rules.
If there is any chance that he may sincerely recognise that his breaking of the rules is a serious matter, perhaps it will come from his own pocket.
He owns 3.85 per cent of Gartmore, which at float was worth £26 million. Thanks largely to the recent crash in the shares – due entirely to talk about rule-breaking – that has fallen to £16 million.