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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 |
| (6 months later) | |
| Tidjane Thiam, the head of Prudential, has become one of the highest profile chief executives to be personally censured by the financial regulator, following an investigation into the insurer's ill-fated bid for AIA three years ago. | Tidjane Thiam, the head of Prudential, has become one of the highest profile chief executives to be personally censured by the financial regulator, following an investigation into the insurer's ill-fated bid for AIA three years ago. |
| The Pru was also fined £30m by the Financial Services Authority (FSA) for failing to be "open" and "co-operative" with the watchdog over the proposed £21bn takeover, which the FSA only found out about through the media. The Pru 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. | The Pru was also fined £30m by the Financial Services Authority (FSA) for failing to be "open" and "co-operative" with the watchdog over the proposed £21bn takeover, which the FSA only found out about through the media. The Pru 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. |
| Censuring Thiam, the regulator 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". | Censuring Thiam, the regulator 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". |
| The FSA is in its last week of existence before being closed down and replaced by the Financial Conduct Authority, which is expected to impose greater scrutiny on the role of senior executives. Some City sources said on Wednesday that the FSA's action represented the start of this new approach and was too heavy handed. | The FSA is in its last week of existence before being closed down and replaced by the Financial Conduct Authority, which is expected to impose greater scrutiny on the role of senior executives. Some City sources said on Wednesday that the FSA's action represented the start of this new approach and was too heavy handed. |
| Attention may turn to the pay of Thiam, who had £50,000 docked from his bonus for 2010 – when his remuneration totalled £5m – as a penalty for the botched deal, which left angry investors with a £377m bill for fees to advisers. His bonus in the subsequent year was deferred and it is understood that the regulatory action will not have any impact on his pay for 2012, likely to be announced next week. | Attention may turn to the pay of Thiam, who had £50,000 docked from his bonus for 2010 – when his remuneration totalled £5m – as a penalty for the botched deal, which left angry investors with a £377m bill for fees to advisers. His bonus in the subsequent year was deferred and it is understood that the regulatory action will not have any impact on his pay for 2012, likely to be announced next week. |
| While investors credit Thiam with a doubling in the Pru's stock market value since the ill-fated deal, they were also said to be keeping an eye on his payout. "If his bonus isn't significantly reduced, there could be an issue," one said. | While investors credit Thiam with a doubling in the Pru's stock market value since the ill-fated deal, they were also said to be keeping an eye on his payout. "If his bonus isn't significantly reduced, there could be an issue," one said. |
| Thiam and the Pru had been disputing the FSA's action but the insurer's chairman, Paul Manduca, said it was time to "draw a line under the matter". There was no discount on the fine – something usually given to those who settle early. | Thiam and the Pru had been disputing the FSA's action but the insurer's chairman, Paul Manduca, said it was time to "draw a line under the matter". There was no discount on the fine – something 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 the Pru's advisers at Credit Suisse had told it to disclose the potential deal, but that the Pru had been concerned, as it was not certain that the deal would proceed and feared news might leak out. | The FSA said the Pru's advisers at Credit Suisse had told it to disclose the potential deal, but that the Pru had been concerned, as it was not certain that the deal would proceed and feared news might leak out. |
| 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 about the deal at a private meeting with Pru executives on 12 February, when it was already under negotiation. | 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 about the deal at a private meeting with Pru executives on 12 February, when it was already under negotiation. |
| "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 FSA 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 FSA said. |
| The regulator said Thiam had "played a significant role" in not revealing the deal until it was leaked, and that his concern about a leak had "materially influenced" his judgment. But some City figures expressed surprise that Thiam had been publicly rebuked when many top bankers have not received similar treatment. | The regulator said Thiam had "played a significant role" in not revealing the deal until it was leaked, and that his concern about a leak had "materially influenced" his judgment. But some City figures expressed surprise that Thiam had been publicly rebuked when many top bankers have not received similar treatment. |
| The FSA stressed that the investigation was into "past events and does not concern the current conduct of the management of the Prudential group". | The FSA stressed that the investigation was into "past events and does not concern the current conduct of the management of the Prudential group". |
| Thiam is a leading figure in the insurance industry and chairs the the Association of British Insurers, which said it had no intention of asking him to resign. | Thiam is a leading figure in the insurance industry and chairs the the Association of British Insurers, which said it had no intention of asking him to resign. |
| Manduca said the chief executive "acted at all times in the interests of the company and with the full knowledge and authority of the board", adding: "The board wishes to express its satisfaction that all parties have agreed to this settlement. | Manduca said the chief executive "acted at all times in the interests of the company and with the full knowledge and authority of the board", adding: "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." |
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