Asset management giant Invesco Perpetual has been fined £18.6m by the Financial conduct Authority for risk control failings that exposed investors “to greater levels of risk than they had been led to expect”.
Between May 2008 and November 2012, Invesco did not comply with the regulator’s investment limits which are designed to protect consumers by limiting their exposure to risk, the FCA said in a statement.
The Financial Conduct Authority reported today (28 April) that Invesco Perpetual broke the FCA’s rules designed to limit the risks to investors on 33 occasions, across 15 funds, resulting in losses of £5m for investors.
A spokesman for Invesco Perpetual said the losses related to the Neil Woodford-run High Income fund and Income funds, as well as the Managed Income fund .
While prompt compensation has been paid to the funds, the regulator warned these losses could have been greater.
The regulator also revealed Invesco did not communicate clearly or fairly with its investors because it failed to disclose the use of derivatives in the relevant simplified prospectuses.
The asset manager incorrectly described the impact of using derivatives in the key investor information documents produced in 2012.
The FCA also found that Invesco Perpetual failed to record trades on time, which meant the funds could have been wrongly priced and did not monitor whether trades were allocated fairly between funds, creating a risk that some funds may have been disadvantaged.
Invesco acted quickly to improve its systems and controls and to remediate the issues identified by the FCA, according to Tracey McDermott, director of enforcement and financial crime at the watchdog.
She said: “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.”
Invesco is the largest retail investment manager in the UK with about £47bn in Invesco Perpetual branded funds.
As the firm agreed to settle at an early stage, it qualified for 30 per cent discount to the fine. Without this, the fine would have been £26.6m.
Mark Armour, chief executive of Invesco Perpetual, said: “We are confident that our systems and controls are now strong, effective and compliant with all applicable regulations.
“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.”
