City watchdog hits Henderson Investment Funds with £1.9m fine for overcharging retail customers
City watchdog the Financial Conduct Authority (FCA) today said it had fined Henderson Investment Funds Limited (HIFL) nearly £1.9m for treating retail customers unfairly.
The FCA said HIFL had overcharged 4,500 retail customers in two of its funds, the Henderson Japan Enhanced Equity Fund and the Henderson North American Enhanced Equity Fund.
In 2011 HIFL’s investment manager decided to reduce the level of active management in its Japan and North America funds.
Institutional investors were informed of this change and their charges were scrapped.
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However, retail investors were not told of the changes and were charged the same fees as previously for five years, despite a much reduced 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.”
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HIFL charged investors nearly £1.8m 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 controls and systems in relation to the management, oversight and governance of this area of its business.
HIFL agreed to resolve the matter and qualified for a 30 per cent discount on its fine. Without this discount the FCA would have imposed a penalty of nearly £2.7m.
A spokesperson for Janus Henderson said: “The FCA’s notice relates to events in the period 2011 to 2016 prior to the merger between Henderson Global Investors and Janus Capital Group in 2017.
“Janus Henderson Investors accepts the FCA’s findings and the financial penalty and has co-operated fully throughout the process. Affected clients had already been separately contacted and fully compensated. Since the incident Janus Henderson Group has improved its systems and controls.”