LONDON (Reuters) - UK fund manager Arch Financial Products and two senior managers have lost a challenge against a regulatory decision to fine and ban the executives from working in financial services for "serious failings".
The Upper Tribunal, an independent body at which regulatory decisions can be challenged, unanimously found that Arch, Chief Executive Robin Farrell and former compliance officer Robert Addison were reckless in managing conflicts of interest.
The regulator, the Financial Conduct Authority (FCA), made the ruling against Arch and the two executives in 2012.
It said on Tuesday that its decision to ban Farrell and Addison and impose fines of 650,000 pounds ($987,000) and 200,000 pounds respectively after finding "serious failings to act with integrity" had been upheld by the Upper Tribunal.
The case hinges in part on Arch's failure to manage and disclose conflicts of interest in managing Arch Cru investment funds. Thousands of private investors lost up to 40 percent of their initial investment when they were suspended in 2009.
The tribunal said Arch, Farrell and Addison had failed to manage conflicts of interest in four specific transactions and failed to ensure that Arch adequately identified and took appropriate steps to mitigate and record such conflicts.
"The judgment is a further reminder to those who work in financial services that they have to act with integrity, and, that when they don't, we will take action to remove them from the industry," said Georgina Philippou, the FCA's acting director of enforcement and market oversight.
The tribunal also upheld the FCA's decision that it would have fined Arch 9 million pounds for misconduct had the group been able to pay, the regulator said in a statement.
Farrell was not immediately available for comment.
In an email to Reuters, Addison said: "Whilst finding a lack of so-called integrity, it is notable that the tribunal did not find any deliberate or dishonest behaviour."
"The tribunal judgment provides guidance on conflicts management that was never provided by the regulator."
The FCA said Farrell, a former global head of the Alternative Investments Group at Dresdner Kleinwort Wasserstein who founded the Arch group of companies around 2002, and former UBS risk management director Addison, could appeal the decision.
($1 = 0.6587 pounds)