H2O Asset Management will pay €250m (£215m) to clients who have been unable since 2020 to access investments then worth around €1.6bn (£1.4bn) to avoid a “substantial” fine from UK regulators.
Following talks with the Financial Conduct Authority (FCA), the watchdog has agreed H2O will make the sum available to all those whose investments remain trapped.
The French firm will apply to cancel its UK authorisation by the end of the year, the FCA added.
Founded in 2010 and with offices in Paris, Monaco, London, Geneva and Singapore, H2O once oversaw more than €30bn (£26bn).
The FCA said H2O committed “serious breaches” by failing to carry out proper due diligence on illiquid securities linked to controversial German financier Lars Windhorst between April 2015 and November 2019.
It also found that H2O did not exercise due skill and care in managing potential conflicts of interest and identified more than 50 instances where H2O employees had not properly declared hospitality, including the use of a superyacht and private jet.
H2O also provided false and misleading statements and documentation to the FCA, such as fabricated records and minutes of meetings, it said.
Loïc Guilloux, H2O’s chief executive, said that with the settlement, the firm acknowledged the FCA’s findings and had taken a “major step forward”.
“Over the last few years, we have significantly improved and consolidated our organisation and strengthened our risk management and compliance teams, governance and internal procedures,” he added.
“These changes ensure that lessons from this period are embedded in our corporate culture.
Today, this settlement enables us to provide a concrete and swift solution to all our unitholders and to
look to the future, whilst remaining focused on our clients’ interests and meeting their needs.”
The latest settlement move follows a record €75m (£64m) penalty issued by France’s markets watchdog earlier this year.
Steve Smart, the FCA’s 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.”