UK financial services industry watchdog, the Financial Conduct Authority (FCA), revealed on Monday that following an investigation into UK retail investment manager Invesco Perpetual, the FCA has imposed a fine of GBP18,643,000 on the company for exposing investors to higher levels of risk.
The FCA found that between May 2008 and November 2012, Invesco Perpetual did not comply with investment limits, which are intended to protect consumers by preventing vulnerability to risk. Losses arising from the breaches of conduct amounted to GBP5m and the funds involved were promptly compensated. However, the FCA said these losses could have been greater.
Invesco Perpetual, which places approximately GBP47bn in Invesco Perpetual branded funds and is comprised of Invesco Asset Management Limited and Invesco Fund Managers Limited Investors, was found the be non-compliant with the FCA’s risk prevention rules on 33 occasions. The FCA discovered that 15 of the Invesco Perpetual branded range of funds did not comply with the rules, which represented more than 70% of the assets under management.
In addition, the company failed to communicate clearly or fairly with its investors because it did not disclose the use of derivatives in the relevant simplified prospectuses. The impact of using derivatives in the key investor information documents produced in 2012 was also incorrectly described. Invesco Perpetual also failed to record trades in a timely manner, which could have resulted in the funds being wrongly priced. Additionally there was a failure to monitor whether trades were allocated fairly between funds, creating a risk that some funds may have been disadvantaged.
However, Invesco Perpetual is said to have acted quickly to improve its systems and controls and to remediate the issues identified by the FCA. The company agreed to pay the fine at an early stage and qualified for discount of 30%, otherwise the fine would have amounted to GBP26,632,900.
The FCA added that its overarching strategic objective is designed to ensure the relevant markets function well. It has three operational objectives to support the strategic objective, which are: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
Commenting on the FCA’s investigation, Mark Armour, CEO of Invesco Perpetual, said: “This refers to a period between May 2008 and November 2012, and the FCA has noted that Invesco Perpetual acted promptly to enhance its systems and controls. 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.”