Icap faces SEC scrutiny over Blackbird role

LONDON -- UK inter-dealer broker Icap could face a raft of regulatory probes, reported FX Week sister organisation RiskNews last week. The probes are connected to accusations that it bought a minority stake in US electronic brokerage Blackbird to stifle potential competition to its own voice-brokered business.

The US Securities and Exchange Commission (SEC) was asked in a July 18 letter by Michael Oxley, chairman of the House of Representatives committee on financial services, to investigate allegations that Icap acquired a 19% stake in Charlotte, North Carolina-based Blackbird, to block attempts by the company to firmly establish the electronic broking of interest rate swaps. Icap denied such charges.

Asking SEC chairman Harvey Pitt to investigate both matters, Oxley’s letter confirmed that the US Department of Justice (DoJ) is also looking into Icap’s Blackbird involvement. Oxley urged Pitt to contact European jurisdictions about the issue, say sources on Capitol Hill.

In an interview two weeks ago with RiskNews, an Icap spokesman said it had not been approached by the DoJ, and believed Blackbird’s liquidity was too small to prompt any serious antitrust concerns. He said Icap’s actions against Blackbird were purely related to protecting a strategic investment.

Icap and Blackbird’s current board have been engaged in an acrimonious dispute over control of the company following Icap’s purchase of its stake in Blackbird early last year for a reputed $12 million. The London-based broker holds about 30% of the voting rights in Blackbird and has teamed up with Blackbird co-founder and former chief executive Ray May and his wife, Rita May, to oust current board members, including Blackbird chief executive Mark Brickell, co-founder and president Shawn Dorsch and chairman Andy Baxter.

A Delaware court ruled on July 17 that Blackbird must hold an AGM by no later than September 10. Icap and the Mays are expected to vote for a board change.

Blackbird management said it has consistently represented the best interests of the majority of the company’s 120-plus shareholders.

Both Icap and Reuters have written off their investment in Blackbird.

A full report investigating the dispute between Icap and Blackbird is published in the August issue of Risk.