FCA Fines Aviva Investors GBP17.61 Million for Systems, Control Failings -- UPDATE

(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 [e-mail]; @IanWalk40289749

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