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UPDATE 1-UK watchdog fines fund ARCM over Premier Oil short selling breaches

Wed, 14th Oct 2020 12:33

(Adds no comment from ARCM, lawyer comment, details,
background)

By Kirstin Ridley and Clara Denina

LONDON, Oct 14 (Reuters) - Britain's markets watchdog fined
hedge fund Asia Research and Capital Management (ARCM) on
Wednesday for a lack of transparency over a short position in
Premier Oil, the first such penalty for a breach of
short-selling rules.

The Financial Conduct Authority (FCA) fined Hong Kong-based
ARCM 873,118 pounds ($1.13 million) for repeatedly breaching
reporting rules and failing to provide important information to
both the regulator and the market.

ARCM declined to comment.

Between February 2017 and July 2019, ARCM failed to make 155
notifications to the FCA and 153 public disclosures of its
position in Premier Oil and built a short position equivalent to
16.85% of Premier Oil's issued share capital, the FCA said.

It took another 106 trading days before ARCM notified the
FCA and disclosed its position, but the FCA said the fund
reported the breaches as soon as it identified them and was able
to, partly because social unrest in Hong Kong at the time barred
staff from accessing the office.

Simon Morris, a partner at law firm CMS, said the penalty
for non-intentional and self-reported breaches showed the FCA's
"unforgiving approach towards breaches of market reporting
requirements".

ARCM's fine was reduced by 30% because it fully cooperated
with the FCA and beefed up controls.

The fund's net short equity position, coupled with its
status as Premier Oil's biggest creditor, led to a bitter battle
with the FTSE 250 group after it opposed the company's
refinancing plans.

One source familiar with the situation said ARCM's short
position was a hedging tool often used by credit funds and
represented only a fraction of its debt exposure.

Premier Oil, which traces its history back to the 1930s,
underwent a debt restructuring in 2017 after the last oil price
collapse and last week agreed to be taken over by private
equity-backed oil and gas group Chrysaor.

($1 = 0.7736 pounds)
(Reporting by Kirstin Ridley and Clara Denina, editing by
Louise Heavens and Elaine Hardcastle)

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