Prudential boss Tidjane Thiam was today rapped on the knuckles by the City watchdog for misconduct during his insurer’s failed takeover of AIA in 2010, becoming the first FTSE 100 chief executive to be censured by the Financial Services Authority.
The regulator said Prudential had failed to tell the watchdog it planned to launch a $35.5 billion (£23.4 billion) bid for its Asian rival.
Along with the censure, effectively a public naming and shaming, Prudential was fined £30 million because it “failed to deal with the FSA in an open and co-operative manner”.
The first time the regulator heard about the deal was when it was leaked to the media on February 27 2010. Prudential had been working on it since October 2009 and contacted AIA owner AIG’s chief executive in December of that year. The FSA said Prudential ignored advice from its adviser Credit Suisse to inform the regulator.
Tracey McDermott, the FSA’s director of enforcement and financial crime, said: “Prudential, led by Thiam as chief executive, 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. 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.”
Prudential was forced to scrap the AIA deal in June 2010 after shareholders indicated they would not back it.
The failure eventually left Prudential nursing a £377 million bill and contributed to the departure of chairman Harvey McGrath, who was not reprimanded by the FSA.
The censure and fine are believed to have been issued after more than a year of talks between Prudential and the regulator. It is believed the FSA had been seeking a fine of up to £80 million.
Both are highly embarrassing for the company and its 50-year-old boss. According to the documents, not only did Thiam, pictured, withhold information from the FSA at a routine meeting between the two parties weeks before the leak, Prudential’s board also considered that the FSA “might be the cause of a leak”.
Paul Manduca, Prudential’s chairman, said the company wished to “draw a line under the matter”.
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“Tidjane acted at all times in the interests of the company and with the full knowledge and authority of the board,” he said.
Comment: a lesson for the new regulator
Given the failure of the Financial Services Authority to bring enough City cowboys to account during its 16-year existence, it is amazing that the watchdog is marking its final days with a bumper fine for our top insurer.
Yet the mishandling of AIA continues to be a blight on Tidjane Thiam’s stewardship of the Pru, even though the company is flying financially. The FSA is grumbling that it was kept out of the loop over a fruitless bid, which the Pru now concedes was the case.
The successors to this regulator, which is being formally carved up next week, know they need to make more examples of wrongdoers, especially as so few of the key players in the banking collapse have been properly brought to account.
In this context, it could be seen as heavy-handed to go after Thiam, but the message is clear. No one — not even an FTSE 100 boss — should have the temerity to think they are above the rules of the City.
James Ashton
