LONDON, Dec 22 (Reuters) - Britain"s markets watchdog said on Wednesday it will fine hedge fund BlueCrest Capital Management UK 41 million pounds ($54.50 million) for conflict of interest failings over a fund set up for BlueCrest staff. Between October 2011 and December 2015, BlueCrest failed to manage fairly a conflict of interest created by switching portfolio managers working on a fund open to investors outside BlueCrest to an internal fund open only to its partners and employees, the Financial Conduct Authority said in a statement. The FCA said this led to a "sub-standard investment management service" being offered to outside investors by BlueCrest, which was co-founded by billionaire Michael Platt in 2000. The FCA also said it was requiring BlueCrest to redress clients who had suffered losses as a result of its failings. It said its findings were provisional as BlueCrest had chosen to refer the case to a further tribunal which would decide the appropriate action, if any, for the FCA to take. BlueCrest said in a statement it planned to "vigorously defend against the FCA"s allegations". It said the fund converted in January 2016 to a private investment partnership, no longer managing external funds. The U.S. Securities and Exchange Commission last year ordered BlueCrest to pay $170 million to investors harmed by the creation of the internal fund. ($1 = 0.7523 pounds)