The Context
Millinium Capital Managers Limited recently referred a former adviser to the Financial Markets Authority and Serious Fraud Office. The adviser allegedly recommended the sale of shares from the Millinium Alternative Fund (MAX) while possessing undisclosed, material information about the company. The shares sold subsequently increased in value by $1.6 million, a direct, quantifiable loss to the fund. The civil claim against the adviser is for $2.458 million.
This is not a compliance success story. A public referral to the SFO is a catastrophic governance signal. It demonstrates that your internal controls failed to prevent, detect, or manage a material conflict of interest. The board’s oversight mechanisms were bypassed, allowing an adviser to act on privileged information at the fund’s expense. You are now relying on law enforcement to clean up a mess your governance framework should have stopped.
The Risk
Your personal liability is not contingent on a criminal conviction of the adviser. It stems from the systemic failure the referral reveals. Under the Financial Markets Conduct Act 2013, directors of the manager and the fund have core duties of care, diligence, and to act in the best interests of the scheme. The FMA will investigate whether the board’s policies on conflicts of interest, insider information, and adviser supervision were fit for purpose and properly enforced.
If they were not, you face allegations of breaching s. 49 of the FMCA (governing managed investment schemes) and failing in your duty under s. 137 of the Companies Act 1993. The civil claim for $2.458m illustrates the scale of potential loss. Regulatory action can include director disqualification, enforceable undertakings, and civil penalties. Your reputation is now permanently tied to an SFO case file.
The Control
A referral is a last resort, not a control. Your questions must go beyond checking the compliance box and probe whether your governance creates genuine integrity.
When was the last time our conflict-of-interest register was stress-tested against actual trading data and adviser communications, rather than just collected annually?
What specific, automated surveillance do we have to flag trades that precede significant price movements, and who is accountable for investigating every single alert?
If we discovered a similar situation tomorrow, what is the exact threshold—in dollars, reputational damage, or client impact—that would force us to make a public referral, versus handling it internally?