Aviva Investors fined £17.6m by financial regulator over conflicts of interest failings
Aviva has been slapped with a multi-million pound fine by the City regulator over failings in its asset management business.
The Financial Conduct Authority has ordered Aviva Investors to pay £17.6m for failing to employ the correct risk management systems and controls which resulted in conflicts of interest not being managed fairly.
“Ensuring that conflicts of interest are properly managed is central to the relationship of trust that must exist between asset managers and their customers," said the FCA's enforcement director Georgina Philippou about the case, which identified the failings between August 2005 and June 2013.
"It is also a fundamental regulatory requirement. This case serves as an important reminder to firms of the importance of managing conflicts of interest effectively by implementing a robust control environment with effective systems to manage the risks. Not doing so risks customers’ interests being overlooked in favour of commercial or personal interests," she added.
Aviva avoided a larger payout of more than £25m by settling the matter with the regulator in a way that was "exceptional" and ensuring no customers were adversely impacted.
On parts of the company's fixed income desks, funds which paid performance-related fees to employees were managed side-by-side, creating an incentive to favour one fund over another, the FCA found.
A weakness in systems allowed traders to delay recording trades for several hours, meaning traders could benefit from intraday price movements being allocated to one fund over another – a practice known as cherry-picking.
Compensation of £132,000 was paid out to eight funds by Aviva to ensure none of the funds were adversely impacted by the trader's activity in 2013.
Aviva Investors has since committed "significant" resources to fixing the weaknesses in its controls.
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. We have a clear focus on simple and specific investment outcomes for clients and we are delivering strong levels of investment performance within a robust control environment.