The French financial regulator proposed a sanction and a €38 million ($45 million) fine on Amundi, related to a series of trades executed in 2014 and 2015.
The Autorite des Marches Financiers' allegations relate to a series of transactions made on Euro Stoxx 50 index constituents by former employees, according to a ratings note published by Morningstar.
The proposed fine is split €30 million for Amundi Asset Management and €8 million for Amundi Intermediation, the company's trading unit.
The transactions date to 2014 and 2015. The AMF said certain employees engaged in "cherry picking" on two funds — executing trades that benefited one fund over another based on how successful it was — which impacted an institutional client, a spokesman for Amundi confirmed. The Morningstar note said the "atypical volume and repeated nature of the transactions caused clients a prejudice of €48.1 million," and that the AMF said this was made possible by "generalized failings in Amundi's control functions and noted that the transactions had resulted in market manipulation."
The second allegation by the AMF was of front-running by the employees.
The third allegation — which Amundi strongly refutes — was of price manipulation of euro stocks, the spokesman said.
The employees colluded to circumvent Amundi's systems. As soon as the situation was discovered, Amundi notified the client, which was fully compensated. The employees were also dismissed. Morningstar's note said the AMF has also requested fines against the individuals and proposed that they be banned from any future employment in financial services.
Amundi conducted an extensive audit, strengthened control mechanisms, hired more people and did not find any further problems, the spokesman added.
Morningstar maintained a neutral rating for Amundi.
"While the AMF's decision is not yet final, such failings are disappointing for Europe's largest asset manager, a firm that otherwise prides itself on its state-of-the-art operational systems and risk management functions," said Mara Dobrescu, director of fixed-income strategies, EMEA at Morningstar, in a comment accompanying the Morningstar note. "The firm still has a long way to go to reach excellence in both operations and investment quality, and we will be closely evaluating whether the improvements made to its risk control functions are truly wide-ranging and effective."
The proposed sanction and fine were outlined at a public session of the AMF's enforcement committee, an independent entity. The committee's final decision is expected "in the coming weeks," a spokeswoman for the AMF said.
Amundi had €1.76 trillion in assets under management as of March 31.
