* Alberto Micalizzi handed 3 mln pound fine by FSA
* FSA says Micalizzi lied to investors to conceal losses
* Micalizzi says FSA investigation "misguided and uneven"
By Tommy Wilkes
LONDON, May 29 Britain's Financial Services
Authority (FSA) has banned Alberto Micalizzi, whose hedge fund
racked up hundreds of millions of dollars of losses in the
credit crisis, and handed him a record fine for an individual in
a non-market abuse case.
The Italian chief executive of London-based Dynamic
Decisions Capital Management was not "fit and proper" to perform
any role in regulated financial services, the regulator said on
Micalizzi was fined 3 million pounds ($4.7 million) for
failing to ensure his business was run soundly and prudently.
Describing Micalizzi's behaviour as "amongst the most
serious it had encountered", the FSA said he lied to investors
to conceal "catastrophic losses" of more than $390 million,
around 85 percent of the value in the DDCM master fund, in 2008.
A Reuters investigation into Micalizzi's fund, DD Growth
Premium, revealed in August that its main investment - $500
million of highly illiquid bonds - had been issued by a company
in a trailer-park suburb of Phoenix, whose head was on the run
from U.S. authorities.
Reuters also found the bonds he bought were backed by a
global network of shell companies that included a Spain-based
charity, the International Charitable Christian Fund.
The FSA said Micalizzi was fully aware the bonds were not
genuine and therefore had no value.
The watchdog has also cancelled DDCM's permission to conduct
regulated financial business and said Micalizzi tried to
frustrate its investigation by repeatedly providing false and
"Alberto Micalizzi's conduct fell woefully short of the
standards that investors should expect and behaviour like his
has no place in the financial services industry," said Tracey
McDermott, the FSA's acting director of enforcement and
LACK OF CREDIBILITY
Micalizzi, a researcher at Milan's Bocconi University,
denounced the FSA's investigation as "misguided and uneven" and
accused the regulator of ignoring documents which "prove no
wrongdoing" in the collapse of his hedge fund.
He also criticised the FSA for announcing his ban and fine
before he had the chance to appeal at the Upper Tribunal,
pointing to the watchdog's similar actions against Ian Hannam,
one of JP Morgan's top dealmakers, who was forced to
resign after receiving a fine for passing on inside information.
"This is all indicative of the FSA being an organisation
desperate to recover from the lack of credibility resulting from
their inability to regulate and prevent the large scandals that
hit the City at the critical time of the global financial
crisis," Micalizzi said.
Micalizzi, who is also under investigation in Italy for
fraud, misled investors about the true position of his fund, the
The purchase and resale of a batch of fictitious bonds
enabled him to create artificial gains for his fund, the FSA
The bond contracts were sold to the fund at a deep discount
to face value, but Micalizzi is judged to have revalued the
bonds at approximately face value when reporting to investors,
booking purported profit of over $400 million in late 2008 to
counterbalance the fund's losses, the FSA said.
In one example, after Micalizzi provided false and
misleading information to conceal the true value of the fund, a
new investor put $41.8 million into it in December 2008.
Micalizzi's fund, which had attracted investors such as RMF,
part of Man Group, and a subsidiary of the Ontario
Teachers' Pension Plan Board, and whose directors included
Michael Nobel, great-grandnephew of the founder of the Nobel
Prize, was put into liquidation in spring 2009.
The fund's liquidator estimated the fund's assets on
liquidation were worth around $10 million. Investors have not
yet received anything from the liquidator, the FSA said.
The FSA said Micalizzi had "demonstrated a total lack of
honesty and integrity" and he posed a substantial risk to the
FSA's objectives of maintaining confidence in the financial
system and protecting consumers.
Jonathan Crook, partner at law firm Eversheds, said the case
raised questions about the quality of an earlier probe launched
by Britain's Serious Fraud Office, which dropped its criminal
investigation into DDCM in 2010 citing a lack of evidence.
"The FSA is not a fraud prosecutor and has therefore taken
steps to discipline Micalizzi in accordance with its statutory
powers. But it all rather begs the question why Micalizzi was
not prosecuted for fraud by the SFO," he said.