You are here: Home - Investing - Experienced Investor - News -

FCA fines Henderson £1.9m for fund failings

0
Written by: Emma Lunn
20/11/2019
The Financial Conduct Authority (FCA) has fined Henderson Investment Funds Limited £1,867,900 for failing to treat investors fairly.

The fine relates to the way more than 4,500 retail investors in two of its funds, the Henderson Japan Enhanced Equity Fund and the Henderson North American Enhanced Equity Fund (the Japan and North American Funds), were treated.

The FCA found Henderson acted in a way that was in contravention of Principle 6 of the FCA’s Principles for Business.

In November 2011, Henderson Investment Funds Limited (HIFL) appointed investment manager, Henderson Global Investors Limited (HGIL) decided to reduce the level of active management of its Japan and North American Funds.

The subsequent treatment of retail investors in these funds was substantially different from its treatment of the institutional investors in the same funds.

HGIL informed nearly all of the institutional investors who were affected by this change and offered to manage these two funds for those investors without charge.

In contrast, HGIL did not communicate the change in investment strategy to any of the retail customers either by amending the funds’ prospectus or otherwise. This meant that for nearly five years HGIL charged these investors the same level of fees as it had before the decision was made without providing the same level of active management.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: “The FCA requires firms to treat all its customers fairly, not just some customers. In this case, retail investors paid fees for active investment management they did not receive.

“For retail clients, the Japan and North American Funds were in effect operating as ‘closet trackers’ as the fees charged to them were inappropriate given the diminished level of active management. The matter is aggravated by the length of time HIFL took to identify the harm being caused to the retail investors and to fix it.”

HIFL charged investors £1,784,465.32 more than if they had invested in a passive fund. HIFL has now disclosed the matter to all affected customers and compensated them for the additional costs they incurred.

The FCA said the situation revealed serious weaknesses in HIFL’s systems and controls in relation to the management, oversight and governance of an area of its business which included the Japan and North American Funds.

This was in contravention of Principle 3 of the FCA’s Principles for Business. These weaknesses resulted in the issue not being identified and resolved for a considerable amount of time.

The FCA said 4,713 direct retail investors, 75 intermediary companies with underlying non-retail investors and two institutional investors in the Japan and North American Funds were affected by HGIL’s decision not to reduce their level of fees.

HIFL agreed to resolve this matter and qualified for a 30 per cent (stage 1) discount under the FCA’s executive settlement procedures. Were it not for this discount, the FCA would have imposed a financial penalty of £2,668,547.40.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

How your monthly bills could rise as the base rate reaches 1.25%

The Bank of England has raised the base rate to 1.25% as predicted – the fifth consecutive rise in just six ...

Low-income pensioner? You could gain £3k top-up

Hundreds of thousands of retirees struggling with a low income are missing out on Pension Credit worth £3,300...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week