- H20 will apply to cancel its UK regulatory authorisation by the end of the year
A London-based asset manager will pay out €250million, nearly £215million, to investors who were trapped in its funds in 2020 after a ‘serious breach’ of City rules.
H2O Asset Management will pay the redress voluntarily and avoid a fine after a Financial Conduct Authority investigation slammed the group’s management of liquidity, due diligence and conflicts of interest.
The fund manager will also apply to cancel its UK regulatory authorisation by the end of the year after failing to make sufficient checks on risky investments and fabricating records supplied to the UK watchdog.
Saga: The FCA identified over 50 instances where hospitality had been received by H2O employees, but was not properly declared (stock image)
H20 was once an investment powerhouse, managing assets of more than €30billion at its peak, before becoming the subject of market and regulatory concern in 2019.
Fears were raised about its investments in illiquid bonds issued by several companies related to German entrepreneur Lars Windhorst, who owns Tennor.
Its exposure to the illiquid – or hard to sell – securities meant H2O was forced to freeze €1.6billion of investor funds in 2020, having already slashed the value of its holdings.
Between April 2015 and November 2019, H2O failed, the FCA said, to carry out proper due diligence on investments relating to the Tennor group of companies, or other companies Windhorst introduced.
The watchdog said H2O also lacked adequate procedures to manage conflicts of interest after it failed to disclose the improper use of superyachts and other kinds of hospitality.
The FCA said it would have imposed a ‘substantial fine’ on H20 had the settlement not been reached.
The watchdog added that investors wishing to take up the offer will ‘receive an enhanced and earlier payment’ for agreeing not to pursue further legal claims, which it warned could ‘take up to six years’.
Steve Smart, joint executive director of enforcement and market oversight, said: ‘H2O’s job was to manage its funds properly and protect investors.
‘It failed to do this and, to make matters worse, it repeatedly provided misleading information to the FCA.
‘Through this settlement the FCA has secured money for affected investors and agreement that H2O will stop operating regulated business in the UK.’
Breaches: The FCA said H20 committed ‘serious breaches’ in relation to illiquid investments
Superyachts, private jets and fabricated records
In a statement, the FCA said: ‘The FCA identified over 50 instances where hospitality had been received by H2O employees but was not properly declared, including the use of a superyacht and private jet.’
It added: ‘The FCA would have imposed a substantial fine on H2O for its serious breaches. However, the FCA has agreed the firm will make 250 million euros available to all those whose investments remain trapped.’
H2O said the €250million comes on top of €229million already repaid, with unit holders that accept the offer receiving an enhanced and earlier payment from the fourth quarter, compared with non-participating unit holders.
Investors who cashed out when the funds reopened in October 2020 after a near two-month suspension would recover between 87 per cent and 93 per cent of the value of their total investment at the time of suspension, the company said.
Loic Guilloux, chief executive of H20, said: ‘Over the last few years, we have significantly improved and consolidated our organisation and strengthened our risk management and compliance teams, governance and internal procedures.’
In January 2023, France’s financial markets watchdog AMF fined H2O and two of its managers close to €100million in total in relation to various breaches.
DIY INVESTING PLATFORMS
AJ Bell
AJ Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund dealing and investment ideas
interactive investor
interactive investor
Flat-fee investing from £4.99 per month
Saxo
Saxo
Get £200 back in trading fees
Trading 212
Trading 212
Free dealing and no account fee
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.
For the latest headlines, follow our Google News channel
Source link