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A 'wake up' call: the implications of Invesco's £18.6m FCA fine

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A 'wake up' call: the implications of Invesco's £18.6m FCA fine

News that Invesco Perpetual had been fined £18.6 million for risk failings is likely to leave rival fund managers looking over their shoulders.

In its thematic review published earlier this month, Financial Conduct Authority (FCA) indicated it was to get tough on the sector.

'Over the next year we will increase the intensity with which we supervise wholesale conduct to ensure that transactions undertaken by these firms do not have a harmful impact on market integrity,' FCA chairman Martin Wheatley (pictured) said at the time.

The financial watchdog has invested significantly in its asset management arm recently, including the hire of former UBS and Goldmans Sachs managing director James Kelly to act as an adviser.

‘This fine marks a new focus from FCA on asset management sector,’ said Ashley Kovas, head of funds at specialist financial services regulatory consultancy Bovill. ‘The FCA has invested heavily in its team of funds supervisors, so I think we will see more fines like this in the near future.’   

Invesco Perpetual's fine was down poor systems controls.

The FCA said the fund firm broke the rules designed to limit risks to investors on 33 occasions across 15 funds between May 2008 and November 2012, include two high profile funds manager by former manager Neil Woodford.  

The regulator also criticised Invesco Perpetual for using manual record keeping systems, which created the risk of fund mispricing.

‘The fine is wake- up call for fund managers that rely on pen and paper record keeping,' Kovas said. ‘The FCA expects firms to invest in technology to meet regulatory standards and it is not afraid to fine them if it thinks their systems are not up to scratch.’

Kovas also believes those firms which generate big revenues could be on the receiving end of some hefty fines.

‘Large firms that generate high levels of revenue now face eye-wateringly high fines because the FCA can fine them a percentage of their revenue. This new approach was introduced by the FCA in 2010 and we are now seeing more of these higher fines come through the pipeline,' Kovas said.  

‘There is now much more money at stake for firms that find themselves in the FCA’s firing line.’

Back in 2012, BlackRock was fined £9.5 million for failing to ensure that £1.3 billion of client assets were properly ringfenced over a three year period.

More recently Aberdeen Asset Management was fined £7.2 million in November 2013 for failing to protect client money and State Street was fined £22.9 million this January for 'hidden' mark-ups.   

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Neil Woodford
Neil Woodford
90/90 in Equity - UK Equity Income (Performance over 3 years) Average Total Return: -3.51%
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