Bates Cunningham failed to reveal syndicate sale
by Yvette Essen
Lloyd's has fined one of its managing agents £150,000 for discreditable conduct.
Bates Cunningham Underwriting will also pay Lloyd's costs of £19,000 for failing to disclose information.
In 1999, Bates Cunningham was owned by parent company Torch Holdings and was the managing agent for Syndicate 877. Torch's subsidiary, Torch Dedicated, provided approximately 78% of the capacity on the syndicate with the remaining funds coming from unaligned capital providers.
In April, Bates Cunningham applied to Lloyd's for consent to buy out the other providers. But at the same time, Torch decided to sell the syndicate. Directors of Bates Cunningham were present at all Torch meetings.
The following month, Lloyd's gave permission in principle for Bates Cunningham to effect the minority buy-out. This was subject to Bates Cunningham/Torch Dedicated obtaining 90% of the syndicate's capacity as a result of the mandatory offer.
In June, Limit registered an interest in purchasing Torch. But in July, Bates Cunningham made an offer to the unaligned capital providers for 0.1p for every £1 of capacity - the minimum price payable.
On 3 November 1999, Limit purchased Torch for 62p per share and Bates Cunningham bought out the remaining financial backers.
The managing agent has now been found guilty of failing to disclose the sale of the syndicate.
In a market statement, the Lloyd's Disciplinary Board said: "Lloyd's may have postponed or suspended the mandatory offer process until after the sale process had been completed, or until Bates Cunningham was prepared to make a proper disclosure to the unaligned Names."
It added that Lloyd's could have refused to allow the buy-out and potential purchasers may have lost interest if it did not own 100% of the syndicate's capacity. The unaligned Names may have also been reluctant to sell their capacity if they had known all the facts.