Examination of Witnesses(Questions 740-759)|
TUESDAY 29 OCTOBER
740. Could you write back to us on that particular
(Mr Crawford) Certainly I will get the
relevant person to write.
741. A couple of questions to both and then
I will finish with Brewin Dolphin. Did you ever intimate to a
fund manager that there would be some reciprocation if they were
to support a fundraising exercise that you were involved in?
(Mr Crawford) No.
742. Never ever. It never crossed your mind?
(Mr Thomas) In fact, sir, the incentives
for institutional investment into new trusts used to be one per
cent. The IFAs used to want 3.5 per cent. We have actually been
placing stock with no placing commission for quite some time.
743. Okay, this is a silly question and I know
what the answer is going to be but I will ask it nevertheless.
Was there a magic circle where a group of brokers and fund mangers
agreed who was going to launch what fund, in what order and who
was going to support it and to what extent?
(Mr Hall) Shall I answer that one, Mr
Chairman. So far as I am concerned, there is no magic circle.
We are not, of course, investment managers so we would not know
what arrangements if they had made any, and this is a matter that
is being investigated of course by the FSA.
744. Sure, but you would go to the stake saying
that there was no magic circle?
(Mr Hall) I would go to the stake saying
if there was one we did not know of it.
745. If there was one?
(Mr Hall) I would not be in a position
to know. None of us here would.
746. But your wildest dreams would never entertain
it, would they?
(Mr Hall) No.
747. What about you, Mr Crawford?
(Mr Crawford) If you are talking about
a magic circle to refer to a small number of fund managers who
ran funds of funds then clearly that was the case. There was a
small number of fund managers, particularly in the early 1990s,
and that group of fund managers who ran fund of funds vehicles
did grow towards the latter part of that decade, indeed.
748. Okay, within that magic circle, or whatever
you like to call it, there would be this group of brokers and
fund managers who agreed who was going to launch what fund in
what order and who was going to support it and to what extent.
(Mr Crawford) Let's break that down a
little bit. We, along with other brokers in the sector like UBS
Warburgs, HSBC and ABN AMRO, would have a number of institutional
clients who would come to us and ask us to sponsor vehicles, and
it may be that we would have more than one institutional client
who would come to us and ask us to sponsor a vehicle round about
the same time so clearly we would say to them, "There has
to be an order because this client came first and you came second",
or, "We are aware in the market that there are other issues
that might be going around so maybe we would be better to delay
that a little bit", as we are doing at the moment where there
are a number of property funds coming into the market and we have
to decide whether we want to compete head on with them or do we
want to try and go before them or after them.
749. Your answer seems a bit different from
Mr Hall's because you would never entertain it but Mr Crawford
is saying that he knows of situations where you would sponsor
a vehicle, or am I just getting it wrong and the two of you have
got exactly the same answers?
(Mr Crawford) What I am saying is if
people commonly believe the term "magic circle" to refer
to a small number of fund managers, and I believe that is what
is commonly referred to as the magic circle, then yes.
750. So there is no magic circle?
(Mr Crawford) I am not saying that. That
is a description being put out by the newspapers.
751. I am asking you, that is why you are here;
is there a magic circle?
(Mr Crawford) There is a magic circle
if that is what is referred to by the newspapers as a small number
of fund managers who run funds of funds.
752. This is interesting. We have got them ratcheting
up and investing in each other and getting gearing.
(Mr Crawford) It is all about descriptions.
It true to say that the term "magic circle" also refers
to the small number of leading legal firms in the United Kingdom.
753. Mr Hall, would you go as far as Mr Crawford?
(Mr Hall) My understanding of what is
being suggested by a magic circle is not just the element of a
fund of fund, which is what is published in the prospectus, it
was going further than that. The suggestion appeared to me to
be that the magic circle is one fund manager investing in another's
to support them and "if you give me something back . . .",
and if that is what you are referring to go as a magic circle,
so far as I am concerned I have got no evidence of it.
754. How many Brewin Dolphin clients participated
in zero dividend preference share issues which were sponsored
by Brewin Dolphin?
(Mrs Bowden) I do not know.
755. You do not know. It is important you write
back to us on this because I want to know how many of those were
discretionary clients and how many were advisory clients. Give
us a rough percentage breakdown, discretionary and advisory.
(Mrs Bowden) That is at the time of placing
you are interested in?
(Mr Hall) We will write to you with those
757. You can take this question down as wellwhat
percentage of your total advisory clients did that represent,
because if your discretionary clients are a higher percentage,
then is that not because they could not ask any questions so,
in effect, they got stuffed with these shares? That is my line
(Mr Hall) Mr Chairman, I can answer that
terribly straightforwardly. We certainly were not supporting issues
at the time. They may have bought shares that we are brokers to
in the after market or shares that we were not brokers to in an
after market, and I am totally clear in my own mind that whether
or not we were brokers to those companies had no effect on the
758. But it is important that you give us the
percentage of advisory and discretionary clients in writing.
(Mr Hall) We will.
759. For your clients sitting on losses due
to zeros that you sold, what is the sum total of those losses
at current market prices?
(Mr Hall) Again Mrs Bowden will answer
because she is heading this team that is investigating.
(Mrs Bowden) The trouble is I have not got an analysis
which separates those holdings which were taken in placings compared
to those which were purchased thereafter.