The UK's largest retail investment manager, Invesco Perpetual, has been fined £18.6 million by the Financial Conduct Authority (FCA) for exposing investors to greater levels of risk than they expected.
The regulator said that between May 2008 and November 2012, Invesco Perpetual did not comply with investment limits designed to cap investors' exposure to risk leading to losses of £5 million, which the FCA says could have been "far greater".
Invesco Perpetual made 33 breaches of FCA rules during the specified period, which occurred across 15 of the Invesco Perpetual-branded range of funds, which represents more than 70% of their assets under management.
Breaches included failing to disclose the use of derivatives in funds, failing to record trades on time, which the regulator says meant that funds could have been wrongly priced, and failing to monitor whether trades were allocated fairly between funds, creating a risk that some funds may have been disadvantaged.
Risks to consumers
Commenting on the action, the FCA says: "As a forward-looking regulator the FCA takes action where we see risks to consumers, not just after they suffer losses. In this case investors of all sizes trusted Invesco Perpetual to manage their money. They signed up for a certain level of risk but we found Invesco Perpetual's actions were at odds with investors' reasonable expectations."
However, the regulator adds that Invesco Perpetual "acted quickly to improve its systems and controls and to remediate the issues identified by the FCA" and that the asset manager's decision to settle "at an early stage" meant their fine was reduced by 30% from £26.6 million to its current level.
In response to the FCA's ruling, Invesco Perpetual chief executive Mark Armour says he is "confident" that Invesco Perpetual's systems and controls are now "strong, effective and compliant with all applicable regulations".
He adds: "The small number of impacted funds were fully reimbursed. In this instance, we clearly fell short of the high standards we consistently strive to deliver. However, we are pleased that this matter has been fully resolved with the FCA and is now closed."
According to Armour, all losses arising from Invesco Perpetual's breaches of FCA rules were "promptly reimbursed" to the funds involved, however he does claim that a number of failings, including failing to record trades on time, did not, in fact, impact investors.
This article was written for our sister website Money Observer