Between April 2015 and November 2019, H2O failed to carry out proper due diligence on investments relating to the Tennor Group of companies owned by Lars Windhorst, or other companies he introduced.
The investments were high risk and hard to sell.
The FCA also found that H2O did not have adequate policies or procedures or exercise due skill and care in managing potential conflicts of interest. The FCA identified over 50 instances where hospitality had been received by H2O employees but was not properly declared, including the use of a superyacht and private jet.
H2O also provided false and misleading statements and documentation to the regulator, such as fabricated records and minutes of meetings.
The FCA would have imposed a substantial fine on H2O for its serious breaches. However, the FCA has agreed the firm will make €250 million available to all those whose investments remain trapped. A significant part of this sum has been made available by way of voluntary contribution from the H2O Group. H2O has waived its rights to fees and investments totalling €320 million and will apply to cancel its UK authorisation by the end of the year.
Steve Smart, joint Executive Director of Enforcement and Market Oversight, said: “H2O’s job was to manage its funds properly and protect investors. It failed to do this and, to make matters worse, it repeatedly provided misleading information to the FCA.
"Through this settlement the FCA has secured money for affected investors and agreement that H2O will stop operating regulated business in the UK.”
• Read the FCA's Final Notice for H2O AM LLP.
• The French financial services regulator, the Autorité des marchés financiers (AMF), is the designated regulator in respect of the collective investments, which H2O managed on a cross-border basis pursuant to the UCITS Directive, and the FCA is the designated regulator of H2O.
• Were it not for the payment of €250 million to affected investors and the fact that the AMF has previously issued a penalty on H2O (currently subject to appeal) in relation to the same investments, the FCA would have issued H2O with a penalty.
• The FCA investigation found that H2O breached Principle 2 (skill, care and diligence), Principle 3 (management and control) and Principle 11 (relations with regulators) of its principles for business.
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