Property investment firm dodges £25m fine

Property investment firm dodges £25m fine



The good conduct of an global investment firm trading in real estate allowed it to reduce a possible £25 million fine by around £8 million….


The good conduct of an global investment firm trading in real estate allowed it to reduce a possible £25 million fine by around £8 million.

Aviva Investors Global Services Limited has been fined £17,607,000 by the FCA the firm was found to have failed to control conflicts of interest.

The regulator discovered that between 20th August 2005 to 30th June 2013 the global asset manager, which currently invests £239 billion on behalf of its investors, failed to control the conflicts essential in the management of funds that attracted different levels of performance fees. This was referred to as “Side-by-Side management”.

Aviva Investors’s Asset Managers make investment decisions on behalf of customers. An incentive structure at the firm created a conflict of interests, as side-by-side traders were incentivised to favour funds paying higher performance fees.

It was also found that Aviva Investors had a “poor control environment”, where Fixed Income Traders were able to delay, for numerous hours, the allocation of executed trades without being known.

The regulator noted that in May 2013, Aviva Investors found evidence of delayed booking and improper allocation of trades by two previous Fixed Income traders between 2005 and 2012. £132 million was then compensated to eight funds managed within the Aviva Group.

The FCA stated that Aviva Investors breached principles three and eight, due to its failure to control its Side-by-Side management of funds, and failure to manage conflicts of interests between itself and its customers fairly.

The “weakness” of the firm’s systems went undealt with for nearly eight years, creating an “unacceptable risk of trader misconduct”.

The regulator stated that it does not consider that the firm’s failings were deliberate or reckless and the firms had let the FCA know about the breaches before the regulator found out the full extent of the breaches.

It was added that Aviva investors worked in an “open and cooperative manner with the Authority, far above and beyond the level expected.”

The authority concluded that a financial penalty was the most appropriate punishment in regards to the circumstances.

“The principal purpose of a financial penalty is to promote high standards of regulatory conduct by deterring firms that have breached regulatory requirements from committing further breaches, helping to deter other firms from committing contraventions and demonstrating generally to firms the benefits of compliant behaviour,” the FCA commented.

The FCA would have imposed a financial penalty at a colossal £25,152,900, however due to the firm agreeing to settle at an early stage of the investigation, it was allowed a 30 per cent discount.



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