(Adds comment from Aviva Investors chief executive.)
By Ian Walker
LONDON--The U.K. Financial Conduct Authority said Tuesday it has
fined Aviva Investors Global Services Ltd. 17.61 million pounds
($26.87 million) for failing to manage conflicts of interest
fairly.
The FCA said that between Aug. 20, 2005 and June 30, 2013, Aviva
Investors employed a "side-by-side" management strategy on certain
desks within its fixed income area whereby funds that paid
differing levels of performance fees were managed by the same
desk.
This type of incentive structure created conflicts of interest
as traders had an incentive to favor one fund over the other.
In May 2013, Aviva Investors found evidence suggesting that two
former fixed-income traders had been delaying the booking of, and
improperly allocating, trades. Aviva Investors sought to ensure
that none of the funds it managed were adversely impacted by this
conduct and paid GBP132 million compensation to eight impacted
funds, the FCA said.
Since discovering the failings, Aviva Investors and its senior
management have worked with the FCA and have committed significant
resources to investigating and addressing the weaknesses in its
control environment, making significant improvements, which include
enhancing governance, strengthening its control framework and
seeking to embed an appropriate culture under the leadership of a
new management team.
Given this co-operation, and because it agreed to settle early,
Aviva Investors received a 30% discount to the fine, the FCA
said.
Aviva Investors Chief Executive Euan Munro said: "We fully
accept the conclusions of this investigation. We have fixed the
issues, improved our systems and controls, and ensured no customers
have been disadvantaged".
"We have also made substantial changes to the management team
which is leading the turnaround of Aviva Investors," Mr. Munro
added.
-Write to Ian Walker at ian.walker@wsj.com; @IanWalk40289749
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