Invesco Fined $31.3 Million for Risk-Limit Failings in U.K.

Apr 28, 2014 8:16 am ET

(Adds Neil Woodford’s departure in fifth paragraph.)

April 28 (Bloomberg) -- Invesco Perpetual was fined 18.6 million pounds ($31.3 million) for failing to comply with risk limits or tell clients about the use of derivatives as leverage in their funds.

Invesco Perpetual, the largest retail investment manager in the U.K., didn’t comply with investment limits over a four-year period until November 2012, leading to 5 million pounds in losses, the Financial Conduct Authority, the U.K. markets regulator, said in a statement today.

Invesco Perpetual, which the regulator says manages about 47 billion pounds, broke rules on limiting risk 33 times, didn’t communicate properly with investors about derivatives, didn’t record trades on time and failed to monitor whether trades were allocated fairly among funds, the FCA said.

“In this case investors of all sizes trusted Invesco Perpetual to manage their money,” the regulator said. “They signed up for a certain level of risk but we found Invesco Perpetual’s actions were at odds with investors’ reasonable expectations.”

The FCA fine is the latest blow to the U.K. arm of Invesco Ltd. The firm is losing Neil Woodford, one of Britain’s best- known retail fund managers, who is taking at least 3.7 billion of client funds with him when he starts at a new firm, Woodford Investment Management, this month.

Threadneedle, Manulife

Earlier this month, St James’s Place Plc said it reassigned about 7.7 billion pounds of funds that were being managed by Invesco to Woodford’s new firm, Threadneedle Asset Management Ltd. and Manulife Financial Corp.

Invesco Perpetual received the regulator’s standard 30 percent discount for cooperating with the probe.

“The small number of impacted funds were fully reimbursed,” Invesco Perpetual Chief Executive Officer Mark Armour said in an e-mailed statement. “In this instance, we clearly fell short of the high standards we consistently strive to deliver.”

--With assistance from Sarah Jones in London.