The Upper Tribunal has published a judgment dismissing Micalizzi’s appeal and upholding the decision of the Financial Conduct Authority (“the Authority”) that Micalizzi failed to act with integrity in carrying out his functions in connection with his role at Dynamic Decisions, a now defunct hedge fund. The Tribunal directed the FCA to impose a penalty on Micalizzi of £2.7 million (reduced from £3 million) and a full prohibition.
Micalizzi is the former CEO of Dynamic Decisions Capital Management Limited (DDCM), the manager of the DD Growth Premium Master Fund (the Fund). The Fund was marketed by DDCM as having a low risk, highly liquid, market neutral strategy.
In the final quarter of 2008, the Fund suffered massive losses amounting to approximately 85% of its value. Micalizzi sought to conceal these losses from investors by deliberately misrepresenting the Fund’s value and subsequently entering into agreements with third parties to acquire units with a face value of US$ 700 million in purported convertible bonds issued by a Nevada based company backed by Russian diesel oil.
The Tribunal found that:
“…events have now shown, beyond doubt, that the bonds were never genuine.”
“Mr Micalizzi deliberately misrepresented the position to the investors, and failed to provide them with information as to the true position, even when it was clear that they had been misled by the original information. Such conduct can only be dishonest.”
Lenders “…did not know the true position was that they had been systematically misled by Mr Micalizzi.”
“...in a number of respects Mr Micalizzi attempted to mislead the Authority.”
The Tribunal also said:
“…whilst Mr Micalizzi was superficially plausible and appeared to be frank and helpful in his evidence, on analysis we have found that in many instances he was none of those things. In our view, in those respects where we have made findings adverse to him, he continued to attempt to mislead this Tribunal with regard to those matters in the same way he had misled investors, lenders, the Authority and others.”
As at 30 September 2008, the Fund’s value was approximately US $437 million. The majority of this was lost by investors following the Fund’s collapse.
In concluding the Tribunal said:
“…the power to prohibit an individual from performing any function is a critical function in relation to the protection of consumers. It is an essential tool in enabling the Authority to achieve its strategic objective to ensure that markets function well, and its operational objectives to protect consumers and to protect and enhance the integrity of the UK financial system.”
Notes for editors
- The Tribunal judgment[1].
- On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA[2].