FSA lashes Prudential with £30m fine and censures boss over AIA deal

The FSA has fined Prudential £30m and censured group chief executive Tidjane Thiam for not telling the regulator about its plans to acquire AIG’s Asian subsidiary AIA in 2010.

The FSA said that Prudential failed to deal with the matter in an open and co-operative manner when it was seeking to acquire AIA in early 2010, because it did not inform the FSA of the proposed acquisition until after it had been leaked to the media on 27 February 2010.

Prudential should have informed the FSA at the “earliest opportunity” to allow it to decide whether to approve or reject the deal on regulatory grounds, the regulator said.

The FSA added that the insurer failed to disclose the proposed transaction at a meeting between the FSA and Prudential executives on 12 February 2010, when the FSA asked detailed questions about Prudential’s strategy for growth in the Asian market and its plans for raising equity and debt capital.

“The proposed transaction would have transformed the group’s financial position, strategy and risk profile and involved a planned rights issue of £14.5bn, which would have been the biggest ever in the UK. The transaction had the potential to impact upon the stability and confidence of the financial system in the UK and abroad,” the FSA said.

The FSA ruled that Prudential wrongly allowed its judgement to be “overly influenced” by its concern about the risk of leaks.

The FSA said that Thiam (pictured) played a significant role, with others, in the decision not to contact the FSA about the proposed acquisition. In censuring him, the FSA made no finding of lack of fitness and propriety in relation to Thiam.

FSA director of enforcement and financial crime Tracey McDermott said: “The FSA expects to have an open and frank relationship with the firms it supervises and with listed companies. It is essential that firms give due consideration to their regulatory obligations at all times. In particular, timely and proactive communication with the FSA is of fundamental importance to the functioning of the regulatory system and the integrity of the market.

“Prudential, led by Thiam as chief executive, failed to give due consideration to its obligation to inform the FSA of this transaction, which would have had a huge impact on the group had it gone through. That was a serious error of judgement for which Prudential is paying the price. Firms should be in no doubt as to the importance of early communication with the regulator in respect of transformational transactions to avoid market and investor disruption.

“Thiam has also been censured in relation to his role in this matter. This case should send a clear message to all board members of their collective and individual responsibility for the decisions they make on behalf of their companies.”