Prudential fined £30m and CEO rapped over ill-fated takeover plan

The fine, one of the heaviest dished out by the Financial Services Authority (FSA), rekindles bitter memories of a costly misjudgment which Britain’s biggest insurer and its chief executive 
Tidjane Thiam are keen to consign to the past.

The FSA said the abortive $35.5bn takeover of AIA in 2010 would have transformed the company and could have damaged the stability and confidence of the financial system in the UK and abroad. “Prudential, led by Thiam as CEO, 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,” said Tracey McDermott, head of enforcement at the FSA.

“That was a serious error of judgment for which Prudential is paying the price.”

The ruling is likely to be one of the last from the FSA, coming just days before the regulator is scrapped and its successor body the Financial Conduct Authority is born. The AIA deal, which was to be funded by a record £14.5bn cash call, collapsed after Prudential’s investors baulked at the price and AIA’s parent, US insurer AIG, rejected a lower bid. Shareholders were left shouldering Prudential’s costs of £377m.

The FSA said Mr Thiam played “a significant role” in the decision not to contact the FSA about the planned takeover and that he was “knowingly concerned in this breach”. But the regulator stopped short of declaring him unfit to hold such a senior position and said it did not consider Prudential’s regulatory breaches “reckless or intentional”.