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| Prudential boss Tidjane Thiam censured by FSA over ill-fated AIA bid | Prudential boss Tidjane Thiam censured by FSA over ill-fated AIA bid |
| (about 1 hour later) | |
| Tidjane Thiam, the boss of Prudential, has become the first serving chief executive of a FTSE 100 company to be censured by the City regulator. | Tidjane Thiam, the boss of Prudential, has become the first serving chief executive of a FTSE 100 company to be censured by the City regulator. |
| The unprecedented action comes after an investigation into the insurer's ill-fated bid for AIA three years ago which led to the Pru being fined £30m by the Financial Services Authority, which had found out about the proposed £21bn takeover through the media. | |
| The Pru, which would have needed to pull off the largest cash call in British corporate history – £14.5bn – if the deal for the Asian arm of the US insurer AIG had succeeded, was found by the FSA not to have been "open" and "co-operative" in its dealings with regulators. | |
| As it censured Thiam, the FSA said it was "necessary to send a clear message to directors of firms as to the fundamental importance of behaving openly and co-operatively towards the FSA". | As it censured Thiam, the FSA said it was "necessary to send a clear message to directors of firms as to the fundamental importance of behaving openly and co-operatively towards the FSA". |
| Thiam and the Pru had been disputing the action by the FSA and the insurer's chairman, Paul Manduca, said it was time to "draw a line under the matter". There was no discount on the fine, usually given to those who settle early. | |
| Tracey McDermott, the FSA's director of enforcement and financial crime, said: "Prudential, led by Thiam as CEO, 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 judgment for which Prudential is paying the price. | Tracey McDermott, the FSA's director of enforcement and financial crime, said: "Prudential, led by Thiam as CEO, 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 judgment for which Prudential is paying the price. |
| "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." | "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." |
| The FSA said that the insurer's advisers at Credit Suisse had told the Pru to disclose its potential deal to buy AIA to the regulator but that the Pru had been concerned it was not certain the deal would proceed and might leak. | The FSA said that the insurer's advisers at Credit Suisse had told the Pru to disclose its potential deal to buy AIA to the regulator but that the Pru had been concerned it was not certain the deal would proceed and might leak. |
| The deal was formally announced on 1 March 2010 but had leaked on 27 February – it collapsed in June in the face of resistance from shareholders. But the FSA felt it should have been informed at a private meeting with Pru executives on 12 February about the deal, which was already under negotiation. | |
| "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 regulator said. | |
| "The proposed transaction's size and scale 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 proposed transaction's size and scale 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. |
| "Thiam played a significant role in the decision not to contact the FSA about the proposed acquisition until after it had been leaked to the media on 27 February 2010. Because Mr Thiam was highly sensitive to the possibility of a leak of the transaction, his judgment about when to inform the FSA was materially influenced." | |
| He is the only serving chief executive of a major company to be censured by the regulator. For instance, when Barclays was fined £290m for rigging Libor its chief executive, Bob Diamond, was not censured – although he left a few days later under pressure from the regulators. | He is the only serving chief executive of a major company to be censured by the regulator. For instance, when Barclays was fined £290m for rigging Libor its chief executive, Bob Diamond, was not censured – although he left a few days later under pressure from the regulators. |
| The regulator stressed that the investigation which had led to the fine was into "past events and does not concern the current conduct of the management of the Prudential group". | The regulator stressed that the investigation which had led to the fine was into "past events and does not concern the current conduct of the management of the Prudential group". |
| Manduca, now chairman of the Pru but a non-executive at the time of the ill-fated AIA bid, said: "Tidjane acted at all times in the interests of the company and with the full knowledge and authority of the board. The board wishes to express its satisfaction that all parties have agreed to this settlement. | Manduca, now chairman of the Pru but a non-executive at the time of the ill-fated AIA bid, said: "Tidjane acted at all times in the interests of the company and with the full knowledge and authority of the board. The board wishes to express its satisfaction that all parties have agreed to this settlement. |
| "Over the past three years, our successful business strategy, led by Tidjane, and fully supported by the board, has delivered excellent results for customers, shareholders and employees. This was most recently demonstrated by our strong annual results for 2012." | "Over the past three years, our successful business strategy, led by Tidjane, and fully supported by the board, has delivered excellent results for customers, shareholders and employees. This was most recently demonstrated by our strong annual results for 2012." |
| Thiam had £50,000 docked from his bonus for 2010 – when his pay totalled £5m – as a penalty for the anger created among shareholders for the botched deal which left investors nursing a £377m bill in fees to advisers. | Thiam had £50,000 docked from his bonus for 2010 – when his pay totalled £5m – as a penalty for the anger created among shareholders for the botched deal which left investors nursing a £377m bill in fees to advisers. |