The FCA has fined Invesco Perpetual £18.6m for fund management failings and exposing investors in 15 funds, including its giant income funds previously run by Neil Woodford, to greater levels of risk than they expected.
Between May 2008 and November 2012, Invesco Perpetual did not comply with investment limits, designed to protect consumers by limiting their risk exposure, on 15 funds with over £35bn invested and representing 70 per cent of the group’s assets. The extent of these losses was £5m and prompt compensation has been paid to the funds.
The funds reimbursed were the Income, High income and Managed Income funds. Thirteen other funds were affected but did not require repayments to be made.
The FCA says Invesco failed to inform investors or explain the risk of its use of derivatives which introduced leverage into the funds.
The fine has been imposed against Invesco Asset Management and Invesco Fund Managers.
The regulator found that Invesco Perpetual:
- Broke the FCA’s rules designed to limit the risks to investors on 33 occasions. These breaches occurred across 15 of the Invesco Perpetual branded range of funds which represented more than 70 per cent of the assets under management;
- Did not communicate clearly or fairly with its investors because it failed to disclose the use of derivatives in the relevant simplified prospectuses, and incorrectly described the impact of using derivatives in the key investor information documents produced in 2012;
- Failed to record trades on time, which meant the funds could have been wrongly priced; and
- Failed to monitor whether trades were allocated fairly between funds, creating a risk that some funds may have been disadvantaged.
FCA director of enforcement and financial crime Tracey McDermott 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.”
Invesco Perpetual chief executive Mark Armour says: “We are confident 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 this matter has been fully resolved with the FCA and is now closed.”