BackEx-BlackRock manager said to be arrested in UK probe
The UK financial watchdog is seeking to crack down on insider trading by employees at London financial companies
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London: Former BlackRock Inc. fund manager Mark Lyttleton was arrested on 30 April as part of an insider trading probe by the UK Financial Conduct Authority, two people familiar with the matter said.
Lyttleton was detained along with an unidentified woman in west London, said one of the people, both of whom declined to be identified because the matter isn’t public. An FCA spokesman declined to comment on the investigation. Lyttleton couldn’t be reached for comment.
The FCA said in a 3 May statement that a 41-year-old man and a 37-year-old woman were arrested when the City of London Police executed a search warrant. The UK’s financial watchdog is seeking to crack down on insider trading by employees at London financial companies after having previously targeted lower-profile individuals. The watchdog is currently prosecuting seven other people for insider dealing, which carries a maximum sentence of seven years in prison upon conviction.
The FCA has informed us that the allegations relate to actions carried out for personal gain, while off our premises, and that neither BlackRock, nor any other employee, is under investigation, Brian Beades, a spokesman for New York-based BlackRock, said in an emailed statement. The firm is cooperating in the investigation, Beades said.
Market abuse
The FCA on 1 April took over the market abuse and consumer finance enforcement duties from the Financial Services Authority, which was phased out by lawmakers who blamed it for failing to prevent the financial crisis in 2008. Sky News reported the arrest on Monday.
Lyttleton, who was based in BlackRock’s London office, ran funds including BlackRock UK Dynamic Fund, with £558 million ($855 million) in assets, and BlackRock UK Absolute Alpha Fund with £383 million in assets, until March. He left BlackRock 28 March, according to one of the people. Lyttleton had worked at Merrill Lynch & Co.’s investment unit, which was acquired by BlackRock in 2006.
The UK Absolute Alpha Fund, which bets on stocks falling instead of rising, rose 1.5% in 2008, beating 98% of its peers, according to data compiled by Bloomberg. By August 2009, the fund had as much as £1.6 billion of assets.
Performance dropped following the financial crisis as Lyttleton bet that rising taxes, high unemployment and cuts in government spending would constrain growth, he said in an August 2009 interview. While his view on the UK economy was correct, the stock market rallied, pushing his fund into the bottom 5% of peers in 2009 and 2010.
Leaving BlackRock
The fund has been in the bottom 2% of its peer group in the last three years and declined 5.6% in the past year, putting it in the bottom 1% of its competitor funds, according to Bloomberg data.
Lyttleton’s UK Dynamic Fund, which climbed 12% in the last year, was in the bottom 20% of funds in its peer group, Bloomberg data show. The fund is now managed by Nick Little, a colleague on BlackRock’s UK equity team.
The arrests last month were in conjunction with searches of homes and offices in Zug, Switzerland. Judith Aklin, a spokeswoman for police in Zug, said the searches there were conducted 30 April after authorities received a request for legal assistance from the UK. She declined to comment further.
Low corporate tax rates have helped attract almost 30,000 companies, including Glencore International Plc and Xstrata Plc, to Zug, as well as hedge funds such as Stone Milliner Asset Management AG, Tiberius Asset Management AG and Argentiere Capital AG.
A Credit Suisse study from 2011 declared Zug the most attractive Swiss canton for doing business. It included factors such as transportation and taxation. BLOOMBERG
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