By Simon Jessop and Kirstin Ridley
LONDON (Reuters) – Britain’s financial markets regulator has fined Henderson Investment Funds (HIFL) 1.9 million pounds (£2 million) for overcharging more than 4,700 retail investors over five years, in its first “closet-tracking” penalty.
The Financial Conduct Authority (FCA) said on Wednesday that nearly all institutional investors at HIFL, now part of Janus Henderson <JHG.N>, were told that the Japan and North American funds would be managed without charge because the level of active management was reduced in 2011.
But retail clients in the Henderson Japan Enhanced Equity Fund and Henderson North American Enhanced Equity Fund
continued to pay the same fees and were collectively overcharged by around 1.8 million pounds, the FCA said.
The FCA fine marks a step up in regulatory action across Europe on so-called ‘closet tracking’, where asset managers charge investors a premium for actively managing a fund’s assets although portfolios are very similar to those of lower cost index-tracker funds.
The FCA, which launched a review of the asset management industry in 2015, said in March that it had launched two enforcement investigations and overseen “voluntary payments” of more than 34 million pounds to investors to date.
Janus Henderson, which manages $356 billion in assets, said it accepted the FCA’s findings, that all affected clients had been fully compensated, systems and controls improved and it had cooperated fully with the investigation.
“The FCA requires firms to treat all its customers fairly, not just some customers,” said Mark Steward, the FCA’s head of enforcement and market oversight.
“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,” he added.
HIFL qualified for a 30 percent cut in the fine by agreeing to resolve the situation, reducing the original fine of 2.67 million pounds.
(Editing by Alexandra Hudson)