The Financial Conduct Authority Invesco Perpetual £18.6 million($31.3 million) for exposing investors to greater levels of risk than they had been led to expect.

The Financial Conduct Authority has fined Invesco Perpetual £18.6 million ($31.3 million) for exposing investors to greater levels of risk than they had been led to expect.

According to the UK regulator, between May 2008 and November 2012, Invesco Perpetual did not comply with investment limits designed to protect consumers by minimising their exposure to risk.

The FCA said that the rules designed to limit the risks to investors were broken on 33 occasions across 15 funds, resulting in losses of £5 million.

“As a forward-looking regulator, the FCA takes action where we see risks to consumers, not just after they suffer losses. In this case, investors of all sizes trusted Invesco Perpetual to manage their money. They signed up for a certain level of risk but we found Invesco Perpetual’s actions were at odds with investors’ reasonable expectations,” said Tracey McDermott, FCA director of enforcement and financial crime

Compensation has been paid to the funds, though FCA warned the losses could have been higher.

The FCA said that Invesco did not clearly inform investors or explain the associated risks of its use of derivatives which introduced leverage into the funds, although the firm was allowed to use derivatives in this way.

In addition, Invesco did not communicate clearly or fairly with its investors - it failed to disclose the use of derivatives in the relevant simplified prospectuses and incorrectly described the impact of using derivatives in key investor information documents produced in 2012.

Invesco Perpetual agreed to settle at an early stage and qualified for a 30 per cent discount on the fine, which would otherwise have been £26.6 million.

“This refers to a period between May 2008 and November 2012, and the FCA has noted that Invesco Perpetual acted promptly to enhance its systems and controls. We are confident that our systems and controls are now strong, effective and compliant with all applicable regulations,” said Mark Armour, chief executive of Invesco Perpetual.

“The small number of impacted funds were fully reimbursed. In this instance, we clearly fell short of the high standards we consistently strive to deliver. However, we are pleased that this matter has been fully resolved with the FCA and is now closed,” he added.