Pru under FSA investigation for failed AIA bid

The FSA is investigating Prudential and its investment bank advisers Credit Suisse, JPMorgan and HSBC over the insurer's $35bn aborted bid for AIA, according to reports.

Prudential was ordered by the FSA to commission law firm Clifford Chance to conduct a skilled persons report into the management of the AIA deal, the Financial Times reported, citing people close to the situation.

The external Section 166 report is focusing on Prudential's investment bank advisers, Credit Suisse, JPMorgan and HSBC, and whether they carried out their duties properly.

Section 166 investigations can force changes to procedures and policies at the companies involved, and lead to enforcement action by the FSA.

Last year, the UK regulator ordered a record 140 companies to commission such reports.

Prudential's agreed bid for Asian life assurer AIA was beset with difficulties, especially on communication issues, from its launch in March last year.

Investors had to wait more than two months from the day the deal was announced until they were able to see the full financial details, at the launch of a $20bn rights issue intended to help fund it.

The rights issue was delayed last May after the FSA demanded the combined group should hold more capital than planned, which forced a restructuring of the financial terms.

But the deal failed after Pru shareholders forced the company to renegotiate the price. This was agreed by the management of AIG, which then owned the company, but was rejected by the US group’s board in favour of pursuing an initial public offering in Hong Kong.

All of the sponsors of the deal are being examined to see whether they reached appropriate standards, a person familiar with the matter told the Financial Times.

The three banks, Clifford Chance, Prudential and the FSA, all declined to comment to the newspaper.