The Financial Conduct Authority (FCA) has fined Invesco Asset Management Limited and Invesco Fund Managers Limited (Invesco Perpetual) £18,643,000 for exposing investors to greater levels of risk than they had been led to expect.
Between May 2008 and November 2012, Invesco Perpetual did not comply with investment limits which are designed to protect consumers by limiting their exposure to risk. The extent of these losses was £5 million and prompt compensation has been paid to the funds. These losses could, however, have been greater.
In addition, the firm did not clearly inform investors or explain the associated risks of its use of derivatives which introduced leverage into the funds, although the firm was allowed to use derivatives in this way.
Invesco Perpetual acted quickly to improve its systems and controls and to remediate the issues identified by the FCA.
"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 is the largest retail investment manager in the UK. Investors place approximately £47 billion in Invesco Perpetual branded funds, much of which is invested by retail consumers. The FCA 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% of the assets under management;
- Didn’t 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.
The FCA has an objective to ensure that consumers are appropriately protected.
Invesco Perpetual agreed to settle at an early stage, qualifying for 30% discount to their fine. Without this, the fine would have been £26,632,900.
Notes for editors
- The final notice.
- The FCA’s investment limits– Invesco broke the restrictions set out in COLL 5.2, exposing investors to higher levels of risk than they expected.
- The FCA principles for business. Invesco breached principle seven (firms should communicate in a way that is clear, fair and not misleading) and principle three (firms should have appropriate systems and controls in place).
- On 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: 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.
- Find out more information about the FCA.