The City enforcer has done a good job in extracting €250million (£215.5million) for British investors in funds managed by H2O investment management.
The London-based fund manager found itself in deep water in 2019 after it was over-exposed to illiquid securities connected to controversial German financier Lars Windhorst.
The Financial Conduct Authority (FCA) opted to demand compensation for investors, rather than hitting H2O with fines, on the grounds that European regulators were better placed to deliver penalties.
The outcome illustrates the efforts of FCA chief executive Nikhil Rathi to deliver results for consumers rather than get hung up on bureaucracy.
It shows how investors need to be wise about asset managers who enjoy the high life.
Probe: The FCA opted to demand compensation for investors, rather than hitting H2O with fines, on the grounds that European regulators were better placed to deliver penalties
It found evidence of conflict of interest and more than 50 examples of H2O colleagues failing properly to declare hospitality, including the use of superyachts and private jets.
That would appear to put some lavish hospitality provided by, or offered to, some UK money managers in the shade.
The FCA’s probe and settlement on behalf of UK investors in H2O is a reminder that it has unfinished business with errant investment guru Neil Woodford.
He, too, enjoyed the good things in life, with showjumping among his passions.
In March this year the FCA secured up to £185.7million in compensation for investors in the closed Woodford Equity Income fund from authorised corporate director Link after five years of work.
As helpful as that has been to savers in Woodford funds, it left unfinished business. My own investment in Woodford Patient Capital, now rebadged by Schroders, shows an 80pc loss in a period when markets (this week’s hiccough notwithstanding) soared.
The regulator put Neil Woodford on a ‘warning notice’ in April, recognising a ‘defective’ approach to managing the funds. Woodford disagrees with the FCA findings, describes the verdict as misconceived and is challenging the finding.
As presently constituted, there are layers of legal protections for alleged wrongdoers.
None of this is satisfying for Woodford investors who are seeking further redress through the courts and would like nothing better than to see the person they trusted with hard-earned savings brought to justice. It doesn’t end there.
Investment platform Hargreaves Lansdown (HL) exposed up to 300,000 clients to Woodford-managed assets either directly or through its own-label funds.
HL is inclined to accept a £5.4billion takeover from a consortium of private equity firms led by CVC.
One trusts that, if there are to be new owners, they will understand the need to repair the reputational and financial damage done to clients.
Growth spurt
The habit of markets, the media and politicians to latch on to bits of economic data and over-interpret knows no bounds.
During the election campaign the Resolution Foundation (whose former chief executive Torsten Bell is now a Labour MP) was remarkably successful in propagating the idea that, on a per capita basis, Britons had become much poorer under the Tories.
One is never quite sure what is really happening to per capita output because there are so many moving parts, including the sharp rise in net legal immigration.
The size of the economic cake also is a moving feast. Recently, the Office for National Statistics said it underestimated growth in 2022 – up 4.8 per cent, not 4.3 per cent.
That might seem a small adjustment but when Bank of England forecasts are so modest for 2024 and 2025 the half a percentage point change makes a big difference. Upgrades also are expected for 2023 and beyond.
Worst economy since the Second World War? Hooey!
King coal
Glencore has had its governance issues, but one cannot but admire its willingness to swim against the tide.
Splitting off the coal and carbon steel holdings, which generate cash, makes no sense and could fund investment in copper, among other things.
Not only that it, but it is ready if opportunities arise to double down on coal.
Why not? Someone needs to make weapons-grade virgin steel.
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