FINAL NOTICE

To:

Mr Cheick Tidjane Thiam

TAKE NOTICE: The FSA of 25 The North Colonnade, Canary Wharf, London E14
5HS gives you final notice that it has taken the following action:

1.
ACTION

1.1.
For the reasons set out in this notice and pursuant to section 66 of the Act, the
FSA has decided to publish a statement that Mr Thiam was knowingly concerned
in a contravention by Prudential Assurance Company Limited of Principle 11 of
the FSA’s Principles for Businesses (Relations with regulators).

1.2.
Following written and oral representations, the FSA issued a decision notice to Mr
Thiam which notified him that it had decided to take the above action. Mr Thiam
referred the matter to the Tribunal but has withdrawn his reference.

2.
REASONS FOR THE ACTION

2.1.
On Monday 1 March 2010, Prudential announced its intention to acquire AIA, a
wholly owned subsidiary company of AIG. The original consideration proposed

was $35.5 billion, including $20 billion cash, to be funded via a rights issue.
Given AIA’s size, the transaction would have been transformative for Prudential.
The proposed rights issue was planned to raise £14.5 billion, would have been the
biggest ever in the UK. Subsequently, facing significant doubts about the extent
to which it had secured the requisite shareholder support, Prudential sought to
renegotiate the terms of the transaction. AIG refused to take a lower price, and on
3 June 2010, Prudential withdrew from the deal, shortly before its shareholders
were due to vote on the proposed rights issue.

2.2.
Supervision has supervisory responsibilities for Prudential’s UK regulated
subsidiaries. In addition, Prudential, though not itself authorised by the FSA, is a
controller of FSA-authorised entities and is an Insurance Holding Company for
the purposes of supplementary supervision under the IGD. Supervision is
responsible under the IGD for undertaking supplementary supervision of PAC,
and is also lead global supervisor for the Prudential Group, responsible for
coordinating supervisory college activities and information sharing amongst
international regulators. Therefore Supervision’s role included responsibility for
understanding the Group’s solvency, risk profile, intra-Group exposures and
transactional issues, and liaising with overseas regulators. Where it is necessary
to require the Prudential Group to take action, the FSA imposes requirements on
PAC.

2.3.
PAC failed to inform the FSA that Prudential was seeking to acquire AIA from
AIG in early 2010, until after the proposed transaction had been leaked to the
media on 27 February 2010. Accordingly, PAC breached Principle 11 by failing
to deal with the FSA in an open and co-operative way and by failing to disclose
appropriately information of which the FSA would reasonably expect notice. In
particular, PAC failed to:

(1)
discuss with the FSA, at the earliest opportunity (and by 11 February 2010
at the latest) the proposed transaction which could have led to the change in
corporate controller of PAC; and

(2)
disclose the proposed transaction at the meeting with Supervision on 12
February 2010. The express purpose of that meeting was to discuss the
Prudential Group’s strategy. At the meeting, the FSA asked detailed
questions about Prudential’s strategy for growth in the Asian market and its
plans for raising equity and debt capital. Mr Thiam, the Chief Executive of
Prudential, discussed the strategy for expansion in Asia at length, but neither
he nor the other Prudential representatives present mentioned the proposed
acquisition. At all material times, Mr Thiam was also the Chairman of PAC
and an approved person holding Controlled Function 1 at PAC.

2.4.
Mr Thiam was knowingly concerned in PAC’s failure to deal with the FSA in an
open and co-operative manner and for failing to disclose appropriately
information of which the FSA would reasonably expect notice when Prudential

3

was seeking to acquire AIA from AIG in early 2010. Mr Thiam was at all
material times Chairman of PAC and an approved person, holding Controlled
Function 1 at PAC.

2.5.
PAC should have informed the FSA about Prudential’s proposed acquisition of
AIA well before 27 February 2010. Mr Thiam played a significant role in the
decision not to contact the FSA about the proposed acquisition until after it had
been leaked to the media on 27 February 2010.

2.6.
The FSA expects to have an open and frank relationship with the firms it
supervises. It is essential that firms give due consideration to their regulatory
obligations at all times. In particular, timely and proactive communication with
the FSA is of fundamental importance to the functioning of the regulatory system.

2.7.
The failure to inform the FSA was significant because it resulted in the FSA
having to consider highly complex issues within a compressed timescale. The
failure to inform the FSA narrowed the FSA’s options in scrutinising the
transaction and hampered the FSA’s ability to assist overseas regulators with their
enquiries in relation to the transaction.

3.
DEFINITIONS

3.1.
The following definitions are used in this notice:

“the Act”

means the Financial Services and Markets Act 2000.

“AIA”

means AIA Group Limited.

“AIG”

means American International Group Incorporated.

“Credit Suisse”
means Credit Suisse Securities (Europe) Limited, who were
appointed by Prudential to act as lead Sponsor. This
required Credit Suisse to advise Prudential in relation to
compliance with the FSA’s Listing Rules, including
interaction with the UKLA. Credit Suisse was authorised
by the FSA to act in that capacity. Credit Suisse had no
mandate or duty to advise PAC in relation to its obligations
as an FSA authorised firm.

“DEPP”
means the FSA’s Decision Procedure and Penalties
Manual.

“EG”
means the FSA’s Enforcement Guide.

“the FSA”

means the Financial Services Authority.

“IPO”

means Initial Public Offering.

“Newco”

means a newly incorporated holding company.

“PAC”

means The Prudential Assurance Company Limited.

“Principle 11”
means Principle 11 of the FSA’s Principles for Businesses
(Relations with regulators).

“Prudential”
means Prudential plc, a FTSE 100 UK listed company and
one of the UK’s largest insurance companies. At the end of
February 2010 it had a market capitalisation of £15.2
billion.

“Prudential Group”
means Prudential and the group of companies of which
Prudential was the parent company.

“the SPA”
means the Share Purchase Agreement relating to the sale
and purchase of all of the issued share capital of AIA
Group Limited between AIA Aurora LLC, American
International Group Inc, Petrohue (UK) Investments
Limited and Prudential agreed on 1 March 2010 including
previous drafts.

“Supervision”
means the Insurance Division of the FSA who supervised
the Prudential Group through PAC.

“the Tribunal”
means the Upper Tribunal (Tax and Chancery Chamber).

“the UKLA”
means the United Kingdom Listing Authority. The FSA
when acting as the competent authority under Part VI of the
Act, is referred to as the UKLA. The UKLA has
responsibility for monitoring and enforcing compliance
with the UKLA Listing Rules.

“the US Treasury”
means the United States Department of the Treasury.

4.
FACTS AND MATTERS

4.1.
Mr Thiam joined Prudential in March 2008 as Chief Financial Officer. In
September 2009, he became Prudential Group Chief Executive. Mr Thiam was at
all material times Chairman of PAC. He is an approved person, holding
Controlled Function 1 at PAC.

The transaction

4.2.
Prudential announced its intention to acquire AIA, a wholly owned subsidiary
company of AIG, on Monday 1 March 2010. The original consideration was
$35.5 billion, including $20 billion cash, to be funded via a rights issue. Given
AIA’s size, the transaction would have been transformative for Prudential. The
proposed rights issue (planned to raise £14.5 billion) would have been the biggest
ever in the UK.

4.3.
Subsequently, facing significant doubts about the extent to which they had
secured the requisite shareholder support, Prudential sought to renegotiate the
terms of the transaction. AIG refused to take a lower price, and on 3 June 2010,
Prudential withdrew from the deal, shortly before its shareholders were due to
vote on the proposed rights issue.

Early stages of the transaction

4.4.
During 2009, AIG began preparations to dispose of AIA by way of an IPO or
third party sale. The disposal was to take place as part of a restructuring
programme, intended to enable AIG to repay the governmental financial
assistance it had received during the liquidity crisis of 2008.

4.5.
In October 2009, Prudential set up an insider list regarding a possible purchase of
AIA, to which Prudential’s non-executive directors were added on 5 November
2009. In December 2009 the CEO of AIG asked the Chief Executive of
Prudential, Mr Thiam, whether it would be interested in putting forward an offer
for AIA. This led to formal discussions between the two parties, and the
commencement of due diligence in early January 2010. The parties signed a
confidentiality agreement on 12 January 2010.

4.6.
The directors of Prudential, including Mr Thiam, met on 31 January 2010 to be
briefed on the proposed transaction by Credit Suisse. There was a consensus
between the directors of Prudential at this meeting that:

(1)
a leak was the key risk to the transaction;

(2)
the FSA was one of a number of parties which might be the cause of a leak;
and

(3)
Prudential wished to fulfil their obligations to inform the FSA in such a way
that leak risk was kept to a minimum.

4.7.
Prudential and Mr Thiam remained highly sensitive to the possibility of a leak of
the proposed transaction during February 2010. This materially influenced their
judgment about when to inform the FSA.

4.8.
On 1 February 2010, Prudential was advised by Credit Suisse of the need to
inform the FSA of the proposed transaction well in advance of its execution. At
that stage, with an announcement timetabled for 15 February 2010, Credit
Suisse’s advice was to approach the FSA by 3 February 2010. Credit Suisse’s
advice around early contact with the FSA was reflected in timetables repeatedly
prepared and provided to Prudential in the weeks leading up to the announcement
of the transaction.

4.9.
As of 1 February 2010, Prudential considered that the transaction’s prospects at
this stage lacked sufficient certainty, such that an approach to the FSA would be
premature.

Leak strategy and the decision to approach FSA

4.10. In early February 2010, Mr Thiam decided that if there were to be a leak
Prudential would, in order to protect the share price and avoid any chance of a
protracted suspension, abandon the deal and issue a ‘no discussions’
announcement. Mr Thiam understood that as and when it adopted a ‘discussions
happening’ announcement strategy that would necessitate informing the FSA.

4.11. In this case, the reason why a change in leak strategy from ‘no discussions’ to
‘discussions happening’ would necessitate an approach to the FSA was that a
willingness to admit and continue discussions in the face of a leak would serve as
a strong indicator that Prudential was in serious, advanced discussions which it
regarded as likely to come to fruition.

4.12. At a Prudential Board meeting on 3 February 2010, the Prudential Board
considered a timetable which identified 17 February 2010 as the date on which the
FSA was to be informed of the proposed transaction. Additionally, the minutes of
the meeting state the Prudential Board’s intention that, “[w]ith an announcement
date of 26 February [2010] currently being targeted, a further Board meeting
would be scheduled for 17 February [2010]. The intention was that the Board
should have sufficient information at that stage to be able to confirm, should a
talks announcement be required, its interest in proceeding.”

4.13. The minutes of Prudential’s Board meeting of 3 February 2010 suggest that the
prospects of a deal between Prudential and AIG had improved markedly by this
stage, owing to the fact that, among other reasons, “[i]t was becoming
increasingly clear that the AIA IPO was running into difficulties, which gave
Prudential a strong negotiating hand”.

7

Development of the transaction

4.14. On 5 February 2010, Mr Thiam and the then Chairman of Prudential held a
meeting in London with the CEO of AIG and gave him a letter signed by Mr
Thiam that had been approved by the Prudential Board which set out a detailed
indicative non-binding proposal. The letter set out, among other things: a
preliminary price range of $30-34 billion in the absence of up to date financial
information; a proposed debt and equity financing structure; a proposed
transaction structure in which Prudential and AIA would be acquired by a Newco;
and a proposed timetable according to which the transaction would be announced
on 26 February 2010.

4.15. By 8 February 2010, timetables prepared by Credit Suisse and provided to
Prudential reflected that the announcement date was now scheduled for 26
February 2010. The approach to the FSA was nevertheless scheduled to take
place on 15 February 2010, thereby permitting 11 days’ advance notice.

4.16. On 9 February 2010, Mr Thiam and the then Chairman of Prudential travelled to
Washington to meet with the US Treasury and AIG. Mr Thiam reported to the
Prudential Board on 11 February 2010 that:

(1)
the US Treasury, which controlled 80% of AIG’s shares, and which the
Prudential Board thought would be ‘very influential’ in the final decision
were ‘much more supportive’ than previously; and

(2)
the AIG special committee, which was managing the process and which had
previously been hostile to the Prudential bid and favoured the IPO, had
voted to keep negotiations ongoing. The AIG special committee recognised
that a sale to the Prudential would be ‘an attractive option’ (although it was
still supportive of the IPO); and

(3)
the Prudential Board meeting initially scheduled for 17 February 2010 was
cancelled as progress had been “at a slower pace than initially expected”.
(The meeting was however reinstated shortly afterwards and did take place.)

4.17. By 12 February 2010, negotiations had progressed sufficiently for Prudential to
send a revised indicative non-binding proposal to AIG. A key revision to the
proposal was the inclusion of a specific price of $35.5 billion, albeit that the
proposal remained subject to a number of caveats, including some relating to the
provision of financial information.

4.18. Also on 12 February 2010, Mr Thiam and another director of Prudential and PAC
met with Supervision. The meeting was one of a series of regular meetings in the
supervisory process, and was the annual meeting focused on allowing Supervision
to gain an understanding of the Prudential Group’s strategy. The FSA asked
detailed questions about Prudential’s strategy for growth in the Asian market and

its intentions to raise equity and debt capital, but Prudential did not disclose the
proposed acquisition of AIA, the potential change in control that was in prospect,
or the rights issue and debt issuance that were proposed to fund the acquisition.

4.19. On 15 February 2010 AIG provided a draft of the SPA to Prudential.

4.20. The progress of the transaction was reported to the Prudential Board at a meeting
of 17 February 2010 as follows:

(1)
the US Treasury had recognised Prudential as a “credible buyer”;

(2)
AIG’s Special Committee had agreed to take Prudential’s proposal to the
AIG Board;

(3)
the AIG Board had asked for the CEO of AIA to be informed of the
proposal;

(4)
a draft SPA was being negotiated between the parties; and

(5)
Prudential’s largest shareholder had agreed to be made an insider to the
transaction (meaning that it could not trade in Prudential’s shares until the
transaction had been announced or abandoned). The shareholder had been
informed of the details of the transaction and had indicated its support.

Change in leak strategy

4.21. At the same meeting, Mr Thiam reported to the Prudential Board that the CEO of
AIG had agreed with Mr Thiam that in the event of a leak, a ‘discussions
happening’ announcement would be issued confirming that the parties were in
talks around the transaction. The Prudential Board agreed that the transaction was
sufficiently advanced whereby, if necessary, Prudential would confirm that
discussions with AIG were ongoing.

Events leading up to the approach to the FSA

4.22. Work around the transaction continued to progress, and Mr Thiam, with the
knowledge and approval of the Prudential Board, met with the CEO of AIA on 19
and 21 February 2010. During that period, the CEO of AIG confirmed to Mr
Thiam that he favoured Prudential’s bid over the IPO. Additionally, AIG
imposed on Prudential a deadline of 25 February 2010 for agreement of the SPA.

4.23. On 23 February 2010, Prudential considered a timetable which scheduled an
approach to the FSA to take place on 24 February 2010. During the meeting, it
was agreed that that approach should be postponed to 26 February 2010, to
coincide with the timing of the AIG Board’s decision whether to accept
Prudential’s offer in place of an IPO.

4.24. The Prudential Board met on 24 February 2010. The minutes of the meeting
record that, “…the due diligence work continued with good progress being made
and no ‘showstoppers’ have been identified. Further progress had been made on
the SPA”.

4.25. The timetable which the Prudential Board considered at the meeting on 24
February 2010 scheduled the approach to the FSA to take place on 26 February
2010.

4.26. On 25 February 2010, Mr Thiam sent a letter that had been approved by the
Prudential Board to his counterpart at AIG, reconfirming the previous price
proposal of $35.5 billion. Mr Thiam also set out the progress that had been made
in respect of the transaction, including:

(1)
“Substantial progress towards agreeing an SPA … we are confident that
this brings us meaningfully closer to an announceable transaction”;

(2)
“The draft SPA contains only necessary conditions … we believe that these
… will be seen as representing a low risk to consummation of the
transaction”;

(3)
“We have now been able to consult with our two top shareholders,
representing together in excess of 16% of our share register, who have both
expressed support for the proposed transaction. Our willingness to
approach them should be an indication to you of the seriousness and
determination with which we approach this transaction”;

(4)
“With respect to financing … we expect to be able tomorrow to provide you
with agreed drafts of the definitive underwriting commitments that will be
signed at the time we sign the sale and purchase agreement.”

4.27. A timetable accompanying the correspondence to AIG proposed the execution of
the SPA on 1 March 2010, with an announcement of the transaction on 2 March
2010.

4.28. The same timetable was included in a document prepared by Credit Suisse on the
morning of 26 February 2010. That document scheduled the approach to the FSA
to take place on 1 March 2010. The SPA was timetabled to be signed on the same
day, with announcement of the transaction to take place on 2 March 2010.

4.29. During the evening of 26 February 2010, it became apparent to Prudential that a
leak of the deal was likely. Notwithstanding this, no approach was made to the
FSA.

4.30. On the morning of 27 February 2010, a report of a rumour about the transaction
was published in the media. Prudential informed the FSA in the afternoon.

4.31. In the morning of Sunday 28 February 2010 Prudential was informed that the AIG
Board had agreed to enter into a transaction with Prudential for the sale of AIA.

The announcement of the transaction

4.32. The SPA had not been signed by the start of trading on 1 March 2010, and a
holding announcement was issued at 7:52am. Prudential’s shares were
temporarily suspended until the SPA was signed and the full transaction
announcement was issued.

4.33. The holding statement issued by Prudential included the following:

‘The company confirms it is not currently contemplating the implementation of
such a combination through a structure that would be classified as a reverse
takeover under the Listing Rules of the UK Listing Authority and intends that any
combination, if agreed, would be effected through a new holding company.’

4.34. The full transaction announcement was issued at 10:09am, following which the
suspension was lifted. The summary at the start of the announcement contained
the following statement:

“The transaction will be effected through the acquisition of both Prudential (by
way of a scheme of arrangement, “the scheme”) and AIA by a new company (New
Prudential).”

Supervisory issues and the end of the proposed transaction

4.35. Numerous supervisory issues arose out of the transaction announced by
Prudential, completion of which was conditional on regulatory approval. Those
issues therefore had to be considered over the weeks following the
announcement.. In particular, Supervision had to consider the size and
complexity of the transaction, its transformative nature for group strategy, the
solvency and risk profile of the proposed enlarged group, the proposed internal
controls, and the geographic scope of the deal (including the legitimate interests
of overseas authorities). It was therefore agreed that Prudential would not publish
its rights issue prospectus until it had received confirmation that the FSA would
not be minded to object to the transfer on supervisory grounds.

4.36. In the event, by 5 May 2010 (the date scheduled for publication of the
prospectus), Prudential was unable to satisfy Supervision that the enlarged group
would have a sufficiently resilient financial position, including whether it would
have a robust regulatory capital position and whether regulatory capital surpluses
held in certain jurisdictions could be applied to meet potential capital demands
which might arise in other areas of the group. As a consequence, Prudential was
unable to publish its prospectus by the scheduled date. The delay contributed to

the considerable speculation surrounding the deal. The prospectus was ultimately
published on 18 May 2010.

4.37. On 1 June 2010, Prudential issued an announcement to the market, noting a prior
announcement by AIG to the effect that it would not consider a revision of the
terms of the sale of AIA. Prudential’s announcement explained that it had
proposed revised terms that would have reduced the price of acquiring AIA to
$30.375 billion. On 3 June 2010, Prudential announced the termination of its
agreement with AIG in respect of the transaction.

5.
REGULATORY PROVISIONS AND GUIDANCE

5.1.
The regulatory provisions and guidance relevant to this notice are set out in the
Appendix.

6.
REPRESENTATIONS AND FINDINGS

6.1.
Below is a brief summary of the key written and oral representations made by Mr
Thiam and how they have been dealt with. In making the decision which gave
rise to the obligation to give this notice, the FSA has taken into account all of Mr
Thiam’s representations, whether or not set out below.

6.2.
PAC made separate representations that it had not breached Principle 11. The
FSA’s summary of PAC’s key written and oral representations (and how they
have been dealt with) is set out in PAC’s notice dated 22 March 2013. Mr Thiam
stated that he endorsed and adopted all PAC’s representations that it had not
breached Principle 11 and if the case against PAC failed, there would be no case
for Mr Thiam to answer. Accordingly, Mr Thiam’s representations herein relating
to the allegation that he was “knowingly concerned” in PAC’s breach of Principle
11 (and the FSA’s findings in relation to the same) are made on the basis that the
FSA has found that PAC contravened Principle 11 for the reasons set out in
PAC’s notice dated 22 March 2013.

6.3.
Mr Thiam denied the allegation that he was knowingly concerned in PAC’s
breach of Principle 11. He made representations that this action against him is
contrary to FSA policy and is not established by reference to his actions and the
events which occurred. Mr Thiam asserted that the FSA has misunderstood and
mis-stated the events which occurred. Mr Thiam also asserted that the proposed
sanction is unprecedented and unwarranted.

The action against Mr Thiam is contrary to FSA policy

6.4.
Mr Thiam submitted that he has a legitimate expectation that the FSA will adhere
to its policies and public statements as to the circumstances in which its
disciplinary powers could or might be exercised against him. The FSA’s stated
position is that it will not pursue approved persons for being “knowingly

concerned” in an authorised firm’s breach unless it identifies behaviour/conduct
on the part of that approved person which is “blameworthy” and “unreasonable”
and “personal” to the individual in question in all the circumstances in which he
found himself at the time. Mr Thiam therefore contended that the action against
him (under section 66 of the Act) is contrary to the FSA’s published guidance on
when disciplinary action will be taken against an individual and is therefore
unlawful. In particular, Mr Thiam contended that the FSA’s action against him is
contrary to policies set out in:

(1)
DEPP and EG. Section 6 of DEPP sets out the FSA’s policy with respect to
the imposition of penalties against approved persons such as Mr Thiam.
DEPP 6.2.4 provides (inter alia) that “... the FSA may take disciplinary
action against an approved person where there is evidence of personal
culpability on the part of that approved person. Personal culpability arises
where the behaviour was deliberate or where the approved person’s standard
of behaviour was below that which would be reasonable in all the
circumstances at the time of the conduct concerned”. Mr Thiam contended
that the adverb “personally” connotes that the individual has engaged in
conduct differentiating him from others. Chapter 2 of EG provides further
guidance as to the FSA’s approach to exercising its disciplinary powers and
confirms that “[t]he FSA will not pursue senior managers where there is no
personal culpability” (EG 2.31); and

(2)
the FSA’s Board Report on the failure of the Royal Bank of Scotland dated
December 2011 (the “RBS Report”) and the Tribunal decision of Pottage v
FSA [Reference FS/201/33] (the “Pottage decision”). Mr Thiam asserted
that some of the clearest statements of the FSA’s prevailing policies as to
the exercise of its disciplinary powers against approved persons can be
found in the RBS Report. Mr Thiam contended that the RBS Report
provides that the FSA will only pursue individuals when in possession of
“very strong evidence” of their “personal culpability”. Personal culpability
entails dishonesty, recklessness or incompetence and incompetence entails
acting “unreasonably”. Mr Thiam contended that the test for
“unreasonable” conduct is straightforward and has been confirmed by the
Tribunal in the Pottage decision. Further, it bears some resemblance to the
test in Bolam v Friern Hospital Management Committee [1957] 1 WLR 582
at 587-588 (the “Bolam test”) by which the common law judges
professionals generally: a professional who acts in accordance with a
practice accepted as proper by a responsible body of professional opinion is
not treated as negligent “merely because there is a body of opinion which
would take a contrary view”. Accordingly, Mr Thiam contended that he
could legitimately expect that he would not face disciplinary action if other
credible persons in his position might have acted as he did or sanctioned his
conduct as consistent with regulatory obligations. To put it another way, Mr
Thiam should only find himself at risk of disciplinary action if his conduct

was “so obviously wrong at the time that it was clearly outside the bounds
of reasonableness”.

6.5.
The FSA has found that it accepts Mr Thiam’s submissions that he has a
legitimate expectation that the FSA will adhere to its published policies as to the
circumstances in which its disciplinary powers could or might be exercised
against him. The FSA considers that the action against Mr Thiam is consistent
with the FSA’s policy as to when it will take action against individuals. The FSA
accepts that for it to take action against Mr Thiam he needs to have been
personally culpable (i.e. his conduct fell below that which would be reasonable in
all the circumstances at the relevant time). The FSA considers that the action
against Mr Thiam is entirely consistent with its published guidance on when
disciplinary action will be taken against an individual and is therefore lawful and
appropriate. The FSA does not accept Mr Thiam’s representations that its action
against him is contrary to its policies set out in:

(1)
DEPP and EG. The FSA considers that the policies in both DEPP and EG
provide that the FSA will take action against approved persons where there
is evidence of personal culpability on their part, in that the behaviour was
deliberate or the standard of behaviour was below that which would be
reasonable in all the circumstances at the time of the conduct concerned
(DEPP 6.2.4.G and EG 2.31). However, the FSA does not accept that the
word “personally” connotes that Mr Thiam’s conduct has to be
differentiated from that of others. The FSA considers that it is possible for
more than one individual to be personally culpable for the same act or
omission.

(2)
the RBS Report and the Pottage decision. The RBS Report and the Pottage
decision are not public statements of FSA policy. The FSA’s stated policy
is found in DEPP and EG (as noted above). In any event, the FSA notes
that the statements in the RBS Report are consistent with the guidance in
DEPP and EG – namely that the FSA will pursue individuals where there is
clear evidence of personal culpability. Further, the FSA considers that Mr
Thiam’s submission that he should only find himself at risk of disciplinary
action if his conduct was “so obviously wrong at the time that it was clearly
outside the bounds of reasonableness” (supported by his reference to the
Bolam test) is simply another way to express the need for personal
culpability pursuant to DEPP 6.2.4G. The FSA accepts that the Pottage
decision also confirms published FSA policy that requires an individual’s
personal culpability be established before the FSA will pursue them.

Mr Thiam was not “personally culpable” for the conduct complained of

6.6.
Mr Thiam made representations that he was not “personally culpable” for the
conduct complained of by the FSA. Such an analysis necessarily involves issues
of fact. Accordingly, Mr Thiam also made representations as to what he asserted
is the correct factual matrix against which his personal culpability (if any) for the
conduct complained of should be considered. The FSA’s case to the contrary
rests on a number of misconceptions as to the true factual position (including an
incorrect understanding of decisions taken by Prudential’s Board) and a failure to
recognise the significance of other matters, such as:

(1)
Mr Thiam’s assessment as to the likelihood of the transaction proceeding.
Mr Thiam asserted in interview with the FSA that he regarded the
transaction as “highly unlikely, completely speculative … ” until 28
February 2010. He contended that the FSA has failed to take account of the
IPO’s primacy (until a very late stage) in Mr Thiam’s mind. That is, a high
likelihood of the IPO meant a low likelihood of the transaction in Mr
Thiam’s mind. Mr Thiam submitted that his view as to the prospects of the
transaction proceeding is relevant to a proper assessment of his conduct.

(2)
the reasonableness of Mr Thiam’s conduct in the course of PAC’s meeting
with Supervision on 12 February 2010. Mr Thiam asserted that the FSA’s
criticism of him for not disclosing the transaction to the FSA during the
meeting with Supervision on 12 February 2010 overlooked the fact that: (1)
Prudential and AIG were no longer working towards an announcement of
the transaction on 26 February 2010 and were no longer working towards
agreeing heads of terms on 17 February 2010; (2) the Prudential Board had
collectively agreed an approach to bringing the regulator inside; and (3)
Prudential’s general interest in acquiring AIA was already well known to
the FSA by reason of Prudential’s failed bid for AIA in February 2009
which had been leaked to the press. In the circumstances, Mr Thiam
contended that it would not be desirable for him to ride roughshod over his
Board’s decision in the manner required by the FSA. Notwithstanding the
foregoing (and for completeness), Mr Thiam also asserted that a pre-
scheduled meeting between PAC and the FSA could not and did not create
an obligation of disclosure where otherwise none had arisen. Accordingly,
Mr Thiam asserted that on no view was his conduct “so obviously wrong at
the time that it was clearly outside the bounds of reasonableness”.

(3)
Mr Thiam’s (and the Prudential Board’s) consistent intention, that the FSA
would be notified at the appropriate time, ahead of execution of the SPA.
The assertion that Mr Thiam had a personal pre-occupation with the risk of
leaks which blinded him as to his regulatory duty to the FSA has no basis in
fact. It was always understood not to be a relevant factor in the decision as
to when to approach the regulator. Mr Thiam submitted that it was only
relevant to whether an earlier approach than was required should/would be

made. That is, it was only relevant in so far as Mr Thiam considered
whether he should be more forthcoming in circumstances where he had no
obligation.

(4)
the collective decision of Prudential’s Board, including Mr Thiam, that the
FSA would be notified at the appropriate time, ahead of execution of the
SPA. Mr Thiam submitted that the decision as to when to approach
Supervision was never one for Mr Thiam alone and was discussed by the
Prudential Board with advisers present on 31 January and 3 February and a
consensus position was reached. Nothing occurred thereafter to render the
decision outdated.

(5)
the fact that Mr Thiam sought, obtained and acted on the advice of reputable
experts. Mr Thiam submitted that as he sought, obtained and acted on the
advice of reputable experts, on the face of it he should not be exposed to
censure. In particular, Mr Thiam asserted that the absence of any advice
from Prudential’s sponsors that disclosure/notification to the regulator was
required for regulatory reasons (as opposed to transactional reasons) must
lie at the heart of any evaluation of whether disciplinary action against him
is appropriate.

6.7.
The FSA rejects Mr Thiam’s representations that he was not “personally
culpable” for the conduct complained of by the FSA. The contemporaneous
evidence indicates that Mr Thiam was the individual most closely involved with
the progress of the transaction. The FSA has considered Mr Thiam’s assertions
that the case against him rests on a number of misconceptions (including an
incorrect understanding of decisions taken by Prudential’s Board) and a failure to
recognise the significance of other matters. The FSA has found that:

(1)
it has not misunderstood the likelihood of the transaction or failed to give
proper weight to the fact that an IPO was the established and favoured
mechanism for disposing of AIA. The FSA considers that the likelihood of
the transaction proceeding was only relevant to the extent that, when the
transaction was in its very early stages, it may have been so speculative or
so uncertain in its terms that no purpose would have been served by
informing the FSA. However, the FSA notes that was not the position by 11
February 2010 (at the latest) when it was clear to Prudential that AIG was
prepared to consider its offer. Further, although the FSA accepts that Mr
Thiam’s assessment of the likelihood of the transaction may have played a
part in his conduct, the FSA considers that the likelihood of the transaction
is simply one consideration that Mr Thiam should have borne in mind when
considering his obligations as an approved person. Another equally
important consideration is the impact of the transaction on the financial
system. Mr Thiam was cognisant that the FSA could reasonably have
expected to be informed of a transaction of this size, scale and
transformational nature. Irrespective of whether the final outcome of the

then ongoing negotiations with AIG remained uncertain, Mr Thiam should
have informed the FSA of the transaction by 11 February 2010 (at the
latest). However, because he was highly sensitive to the possibility of a leak
of the proposed transaction, his judgment about when to inform the FSA
was materially influenced.

(2)
Mr Thiam’s assertion that the pre-scheduled strategy meeting between PAC
and the FSA on 12 February 2010 could not and did not create an obligation
of disclosure where otherwise none had arisen is misconceived. It is evident
that PAC’s obligations under Principle 11 can only properly be understood
as part of the factual matrix which includes Mr Thiam’s (and PAC’s)
meeting with Supervision. Such meetings are aimed at assisting the FSA in
the discharge of its regulatory functions. Mr Thiam was the senior person
representing PAC at the meeting and he acknowledged in interview that as
at the date of the meeting with Supervision it was up to him (as opposed to
the Prudential Board) to exercise his personal judgment as to whether or not
to inform the FSA of the transaction. As already noted, Mr Thiam was
cognisant that the FSA could reasonably have expected to be informed of a
transaction of this size, scale and transformational nature. In those
circumstances, it was unreasonable of him not to notify the FSA of the
transaction at the strategy meeting with Supervision on 12 February 2010 (at
which Prudential’s strategy in Asia was discussed). For the foregoing
reasons, the FSA does not accept that Mr Thiam’s representations that: (1)
the Prudential Board had collectively agreed an approach to bringing the
regulator inside; (2) he did not want to ride “roughshod” over his Board’s
decision; and (3) Prudential’s general interest in acquiring AIA was already
well known to the FSA (by reason of Prudential’s failed bid for AIA in
February 2009 which had been leaked to the press) assist him.

(3)
it accepts that Mr Thiam’s consistent intention was that the FSA would be
notified at the appropriate time, ahead of execution of the SPA. However,
the FSA has also found that Mr Thiam’s concerns about leak risk materially
influenced his judgment as to what the appropriate time to inform the FSA
was. In support of this finding, the FSA considers that there is significant
contemporaneous evidence that leak risk was a significant factor in Mr
Thiam’s consideration as to when to inform the FSA about the transaction.
In the FSA’s view, Mr Thiam’s high sensitivity regarding leak risk was the
reason why the FSA was not approached earlier than it was (as required).

(4)
whilst it accepts that Mr Thiam sought to keep Prudential’s Board updated
as to progress of the transaction, and that the Board was aware of the
approach being adopted in relation to notification of the FSA, the FSA
considers that the contemporaneous evidence is consistent with its view that
the decision regarding timing of contact with the FSA about the transaction
was primarily Mr Thiam’s responsibility and Prudential’s Board expected
him to take the lead on this issue (and, as Mr Thiam put it in his interview

with the FSA, exercise his judgment). The contemporaneous evidence also
shows that he was the Board member of PAC who was most closely
involved with the progress of the transaction. In any event, the FSA notes
that the fact that other individuals might also have been culpable does not
exonerate Mr Thiam.

(5)
it accepts that Mr Thiam sought and obtained the advice of reputable
experts. However, whilst the FSA accepts Mr Thiam’s assertion that he was
not
provided
with
advice
from
Prudential’s
sponsors
that
disclosure/notification to the regulator was “required for regulatory
reasons”, the FSA does not consider this argument to be persuasive. In any
event, the FSA has found that Mr Thiam did not need advice (from experts
or otherwise) to know to inform the FSA about the transaction because the
contemporaneous evidence indicates that he was aware of the need to do so.
However, because Mr Thiam was highly sensitive to the possibility of a leak
of the transaction, his judgment about when to inform the FSA was
materially influenced. Accordingly, the FSA considers that whether or not
Prudential’s sponsors advised Mr Thiam that disclosure/notification to the
regulator was required for regulatory reasons is largely irrelevant to its
evaluation of whether disciplinary action against Mr Thiam is appropriate in
the circumstances.

The sanction is unwarranted and without precedent

6.8.
Mr Thiam made representations that the action against him under section 66 of the
Act is unwarranted and without precedent. It cannot and will not advance any of
the FSA’s regulatory objectives. By contrast it poses a grave threat to Mr
Thiam’s reputation and career.

6.9.
Mr Thiam submitted that:

(1)
without exception, the factors identified in DEPP 6.2.1 which are relevant to
the FSA’s decision as to whether or not to take disciplinary action against
Mr Thiam militate against doing so; and

(2)
there is no precedent for the FSA seeking to take action against an
individual in circumstances comparable to those of Mr Thiam.
Accordingly, the sanction is unwarranted in all the circumstances of the
case.

6.10. The FSA has found that:

(1)
it does not accept that Mr Thiam’s submission that all the factors identified
in DEPP 6.2.1 militate against taking action against him (for all the reasons
provided herein). In particular the FSA considers that Mr Thiam’s
submission is inconsistent with the guidance at DEPP 6.2.1G(1)(e) which

states that one relevant factor is “the impact or potential impact (emphasis
added) of the breach on the orderliness of markets including whether
confidence in those markets has been damaged or put at risk”. The FSA
considers that the risk to market confidence was clear in this case; and

(2)
whilst it accepts that there are no cases that are directly comparable on their
facts to this one, it has properly considered all analogous cases (being cases
against individuals at large firms where there was no finding of a lack of
fitness and propriety). In any event the FSA considers that the sanction in
this case is both appropriate and proportionate by reference to the factors set
out in DEPP 6 (see the analysis below).

7.
THIRD PARTY

7.1.
Below is a brief summary of the key written representations made by Credit
Suisse (as third party) and how they have been dealt with. In making the decision
which gave rise to the obligation to give this notice, the FSA has taken into
account all of Credit Suisse’s representations, whether or not set out below.

7.2.
Credit Suisse made representations that:

(1)
it was inaccurate for it to be described as “lead sponsor”. Although it
initially acted as the sole sponsor to the proposed transaction, from 20
February 2010 it was communicating the collective advice of all the
sponsors. Further, the concept of “lead sponsor” is not referred to in the
Listing Rules; and

(2)
references to it in the context of PAC’s obligations under Principle 11 risk
suggesting that Credit Suisse had a mandate or duty to advise PAC in
relation to its obligations as an authorised firm under Principle 11. Credit
Suisse stated that it had no mandate or duty to advise PAC.

7.3.
The FSA has found that:

(1)
whilst it accepts Credit Suisse’s submission that the concept of “lead
sponsor” is not referred to in the Listing Rules, that is not a reason for this
notice not to reflect the factual reality that: (1) between 31 January 2010 and
20 February 2010, Credit Suisse was the sole sponsor; and (2) from 20
February 2010, it was taking the lead among the sponsors in communicating
advice to Prudential (i.e. Credit Suisse continued to act as the primary
interface with the client);

(2)
it does not accept that references to Credit Suisse in the context of PAC’s
obligations under Principle 11 (in this notice) risk suggesting that Credit
Suisse had a mandate or duty to advise PAC in relation to its obligations as
an authorised firm under Principle 11 because, in this notice, the FSA has

used an amended definition of Credit Suisse to make an explicit statement
that Credit Suisse had no mandate or duty to advise PAC in relation to its
obligations as an FSA authorised firm.

8.
FAILINGS

8.1.
Between 11 February 2010 and 27 February 2010, Mr Thiam was knowingly
concerned in PAC’s breach of Principle 11 by failing to deal with the FSA in an
open and co-operative way and by failing to disclose appropriately information of
which the FSA would reasonably expect notice for the following reasons:

(1)
PAC should have discussed with the FSA, at the earliest opportunity, the
prospective change in control of PAC (SUP 11.4.8G). It is clear that, in the
circumstances of the proposed transaction, waiting to inform the FSA until
there was a formal agreement in respect of the change of control (i.e. when
the SPA was signed) would not fulfil the obligation to be open and
cooperative with the FSA.

(2)
The FSA expected PAC to disclose the prospective transaction to the FSA
by 11 February 2010 at the latest, given the developments contained in Mr
Thiam’s update to the Prudential Board on that date. As a result of the
developments referred to in Mr Thiam’s update to the Prudential Board on
that date, Mr Thiam and PAC were aware that the transaction was
significantly advanced. In particular, the FSA would have expected PAC
and Mr Thiam to disclose the prospective transaction at the meeting with the
FSA on 12 February 2010. The express purpose of that meeting was to
discuss Prudential Group strategy, the FSA asked detailed questions about
Prudential’s strategy for growth in the Asian market and its plans for raising
equity and debt capital, and Mr Thiam discussed growth in Asia at length,
but omitted to mention the transaction.

9.
SANCTION

9.1.
The FSA’s policy on the imposition of financial penalties and public censures is
set out in DEPP and EG. Mr Thiam’s misconduct occurred prior to 6 March
2010, the date on which the FSA’s current penalty regime came into force. In
determining the proposed sanction, the FSA has had regard to the guidance under
the previous penalty regime. The FSA considers the following factors to be
particularly important.

Deterrence (DEPP 6.4.2G(1))

9.2.
Given the circumstances of this case the FSA considers it necessary to send a
clear message to directors of firms as to the fundamental importance of behaving
openly and co-operatively towards the FSA.

Seriousness and impact of the breach (DEPP 6.2.1(1))

9.3.
The FSA considers Mr Thiam’s conduct to be serious for the following reasons:

(1)
Mr Thiam is the CEO of a highly prominent, FTSE 100 company. He is
approved by the FSA, holds Controlled Function 1, and has extensive
industry experience, including experience of mergers and acquisitions, and
of interaction with regulators.

(2)
Timely and proactive communication with the FSA is of fundamental
importance to the functioning of the regulatory system. It is vital that the
FSA be appropriately informed about transactions with potentially
significant market and regulatory implications. That importance is
heightened in the context of transformative transactions with global
implications. The transaction in this case was so significant that it had
potentially far-reaching consequences for tens of thousands of investors and
for the stability and confidence of the financial system in the UK and
abroad.

(3)
At the meeting on 12 February 2010, Mr Thiam failed to mention the
proposed transaction when questioned by the FSA about aspects of
Prudential Group strategy to which the transaction was clearly highly
relevant.

(4)
Mr Thiam had numerous opportunities and was repeatedly advised of the
need to inform the FSA of the transaction, yet played a significant role in
PAC’s failure to do so. Mr Thiam and PAC remained highly concerned
about leak risk throughout the transaction, and this sensitivity clearly
affected their judgment about when to inform the FSA. Because of this,
they failed to give due weight to the importance of complying with PAC’s
regulatory obligations. Mr Thiam should not have allowed his high
sensitivity that the FSA would leak the transaction to play a material part in
his decision making.

(5)
As a consequence of the delay in informing the FSA, Supervision was
required to make far-reaching decisions regarding complex issues within
compressed timescales. The FSA is satisfied that appropriate decisions
were made. However, Mr Thiam’s role in PAC’s failure to appropriately
inform the FSA had the following consequences:

(a)
hampering the FSA’s ability to meet its obligations by responding
adequately to overseas’ supervisors’ enquiries and requests for
assistance when news of the deal broke;

(b)
narrowing the FSA’s options in scrutinising the transaction generally,
which was especially important given the size and significance of the
transaction, its implications in the UK and abroad, and heightened
regulatory and market concerns around prudential and capital
adequacy issues following the financial crisis in 2008; and

(c)
risking delay to the publication of the prospectus to the rights issue,
thereby contributing to the significant speculation around the deal and
the risk of loss to other market users.

The extent to which the breach was deliberate or reckless (DEPP 6.2.1(1)(a))

9.4.
Mr Thiam was knowingly concerned in the formation by PAC of an intention to
delay approaching the FSA which was based on inappropriate considerations and
on an assessment by them of their regulatory obligations which the FSA views as
misconceived. However, the FSA accepts that Mr Thiam and PAC did consider
its obligations in forming its assessment. Although the FSA considers that the
circumstances of Mr Thiam’s breach are serious, the FSA does not consider that
the breach was reckless or deliberate.

Whether the person has made a profit or avoided a loss (DEPP 6.4.2 (2))

9.5.
Mr Thiam did not profit from the breach.

Disciplinary record and compliance history (DEPP 6.4.2(6))

9.6.
Mr Thiam has not been the subject of previous FSA disciplinary action.

Other action taken by the FSA (DEPP 6.5.2(10))

9.7.
In determining the appropriate sanction, the FSA has taken into account sanctions
imposed by the FSA on other approved persons for similar behaviour. However,
the FSA has also had regard to the principal purpose for which it imposes
sanctions, namely to promote high standards of regulatory conduct.

9.8.
The FSA considers in all the circumstances that the seriousness of the breach
merits a public censure.

10.
PROCEDURAL MATTERS

Decision Maker

10.1. The decision which gave rise to the obligation to give this notice was made by the
Settlement Decision Makers.

10.2. This Final Notice is given under and in accordance with section 390 of the Act.

10.3. Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of
information about the matter to which this notice relates. Under those provisions,
the FSA must publish such information about the matter to which this notice
relates as it considers appropriate. The information may be published in such
manner as the FSA considers appropriate. However, the FSA may not publish
such information if such publication would, in the opinion of the FSA, be unfair
to the recipient or prejudicial to the interests of consumers.

10.4. This Final Notice will be published on the FSA’s website on 27 March 2013.

FSA contacts

10.5. For more information concerning this matter generally, Mr Thiam should contact
Celyn Armstrong (020 7066 2818) or Charles Hastie (020 7066 6836) at the FSA.

Jamie Symington
Head of Department
FSA Enforcement and Financial Crime Division

APPENDIX

RELEVANT LEGISLATION, REGULATORY REQUIREMENTS,

GUIDANCE AND COMMENTARY

1.
The FSA is authorised, pursuant to section 66 of the Act, if it considers that an
approved person has been knowingly concerned in a contravention by the relevant
authorised person of a requirement imposed on that authorised person by or under
the Act, to publish a statement of his misconduct.

Regulatory requirements and guidance

2.
Principle 11 of the Principles provides that:

“A firm must deal with its regulators in an open and co-operative way, and must
disclose to the FSA appropriately anything relating to the firm of which the FSA
would reasonably expect notice.”

3.
SUP 15.3 contains guidance on firms’ requirement to communicate with the FSA
in accordance with Principle 11. SUP 15.3.8 G states that compliance with
Principle 11 includes, but is not limited to, giving the FSA notice of any proposed
restructuring, reorganisation or business expansion which could have a significant
impact on the firm's risk profile or resources, and any action which a firm
proposes to take which would result in a material change in its capital adequacy or
solvency.

4.
SUP 15.3.10 G states that:

“The period of notice given to the FSA will depend on the event, although the FSA
expects a firm to discuss relevant matters with it at an early stage, before making
any internal or external commitments.”

Content and timing of notification regarding a change of control

5.
SUP 11.4.2R provides as follows:

“A UK domestic firm, other than a non-directive firm, must notify the FSA of any
of the following events concerning the firm:

(i)
a person acquiring control;

(ii)
an existing controller increasing control;

(iii)
an existing controller reducing control;

(iv)
an existing controller ceasing to have control.

6.
SUP 11.4.8G provides as follows:

“Principle 11 requires firms to be open and cooperative with the FSA. A firm
should discuss with the FSA at the earliest opportunity, any prospective
changes of which it is aware, in a controllers or proposed controllers
shareholdings or voting power (if the change is material). These discussions
may take place before the formal notification requirement in SUP 11.4.2R or
SUP 11.4.4R arises. (See also SUP 11.3.2G). As a minimum, the FSA
considers that such discussions should take place before a person:

(1)
enters into any formal agreement in respect of the purchase of shares or a
proposed acquisition or merger which would result in a change in control
(whether or not the agreement is conditional upon any matter, including
the FSA's approval); or

(2)
purchases any share options, warrants or other financial instruments, the
exercise of which would result in the person acquiring control or any
other change in control.