FCA slaps £18m fine on Invesco Perpetual over risk failures

by on April 28, 2014 7:21 pm BST

Invesco Perpetual has been fined £18.6m by FCA for over risk failures and disclosure rules in its funds, including those run by Neil Woodford just a day before the star fund manager officially leaves the business.

The Financial Conduct Authority (FCA) said Britain’s biggest retail fund manager had generated £690m of revenue over four years by selling funds to investors that were exposed to too much risk. The hefty fine, which is the fourth biggest relating to retail financial products, would have been £26.6m had Invesco Perpetual not co-operated fully and qualified for a 30pc discount.

Invesco Perpetual is Britain’s biggest retail fund manager faces record fine for risk failures in funds, including in those managed by Neil Woodford, which still generated nearly £700m of revenues in four years.

The group made a total of 33 trades, affecting 70 per cent of assets under management, that were in breach of the FCA’s rules on operating collective investment schemes. The Henley-based company also introduced leverage of up to £1bn into funds through the use of derivatives without adequate disclosure to investors. The breaches, which resulted in £5.3m of losses to three equity funds, took place between May 2008 and November 2012.

During the same period, Invesco Perpetual introduced a series of derivative products into the funds without properly disclosing the move to investors. Later on, when the derivatives were disclosed, the finance house failed to properly explain the risks to investors, as well as the rewards.

The FCA did not name the funds affected in its final notice, but Invesco Perpetual confirmed that the three funds were Invesco Perpetual Income and High Income, which until early March were run by Mr Woodford, and Managed Income, run by Nick Mustoe. It said the funds’ losses had been reimbursed by the company.