Michael Spencer’s Crap Year Just Got A Lot Better

For MPs having their wrists slapped for claiming tins of dog food on expenses, it must be galling to see Michael Spencer, Conservative party treasurer, rake in £25m after his brokership company Icap raised their dividend payment by 9% yesterday. Spencer owns a 21% stake in the company, and therefore gets a massive payday.

It’s a bright spot for Spencer after a year of both personal and professional choppiness. He split with his wife of 25 years last summer, prompting speculation about a record divorce payment, though the pair insist they are just separated; he’s now dating Sarah Walker, the former marchioness of Milford Haven and daughter of gang boss George Walker. A loss of confidence in Icap sent their share price down, meaning that Spencer’s fortune has declined by £250m, though revenue has remained strong throughout the crisis. But even that’s taken a blow recently, after some of Wall Street’s biggest banks started using their own Dealerweb system to trade mortgage bonds rather than Icap’s Brokertec system.  

Spencer “only” made £15m off selling his share in investment bank Numis, a third of what he would have made from it back in 2006 when shares were at their peak. And before he sold it off, he used his own shares in Numis as collateral for a loan from HSBC, without telling the stock market he’d done so; you’ll remember that David Ross did something similarly illegal with Carphone Warehouse shares. Spencer’s investment firm IPGL is hurting, making a £3.5m loss over the last 12 months, after clients for its spread-betting company City Index lost £43m over the period and IPGL had to ride to the rescue with loans; they’ve just taken on nearly £200m from HSBC to buoy their balance sheet. Questions were also asked of him after he advised councils that Icelandic banks were safe as houses, when they quite clearly weren’t. And most recently, a tax enquiry is being made into Icap over a potentially false share valuation that could affect the amount of capital gains tax they pay.

But Spencer isn’t sobbing over a snow-globe just yet – he’s bolstering Icap to allow them to benefit from the more stringently regulated banking system that’s being created in the wake of the crisis. As this excellent piece in today’s FT outlines, the derivatives market is in the middle of a major overhaul. Part of the reason why capitalism froze after Lehman collapsed was because derivatives had been traded without collateral, and privately so that it was uncertain what the risks were – no-one wanted to trade because they didn’t know what they were getting. To prevent such uncertainty, derivatives must be exchanged through a clearing house to ensure greater transparency; Icap has recently set up businesses that deal with getting derivatives trades through clearing, and is set to reap the increased commissions from those. If you can’t beat increasingly tightly regulated trading, join it.

Posted by Ben Beaumont-Thomas in Hot Money | May 20, 2009 11:30AM |