Watchdog slaps record £3m fine on hedge fund boss

The Financial Services Authority (FSA) said Alberto Micalizzi, chief executive of Dynamic Decisions Capital Management (DDCM), lied to investors by concealing the true value of his company’s master fund. He will dispute the claims at a tribunal.

Despite the “catastrophic” losses, the FSA said Micalizzi, who has a PhD in finance from Imperial College London, continued to court new investors, including one who put up £27m.

When the fund went bust, the liquidator estimated it was worth around £6.3m. Tracey McDermott, the FSA’s acting director of enforcement and financial crime, said: “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.”

As well as being landed with a fine, which is the largest penalty issued by the FSA for an individual not involved in market abuse, DDCM has been banned from continuing operations.

Italian Micalizzi, who was a professor of finance at Bocconi University in Milan, founded investment management firm DDCM in 2004 and worked out of offices in South Kensington, London.

The losses incurred by the company’s master fund between October 1, 2008 and December 31, 2008 were around 85 per cent of the fund’s total value, the FSA said. Micalizzi entered into a number of contracts, for the purchase and resale of a type of bond, knowing the bond was not a genuine financial instrument, the regulator said.

The fund was placed into liquidation in May 2009 and to date no payment has been made to any investor by the liquidator. Ms McDermott added: “Although investing in hedge funds can carry greater risk than many other asset classes, investors in funds controlled by regulated hedge fund managers are entitled to be treated with exactly the same honesty and integrity as other firms.”

The tribunal is expected to be heard early next year.