H2O Asset Management is challenging a €93 million ($99 million) fine imposed by French regulators for alleged breaches of investment rules for some of its UCITS funds.
The manager also named Loic Guilloux as CEO, with Group CEO Bruno Crastes — who was individually fined and had management sanctions imposed on him — remaining with the firm as group corporate and market strategy director, a news release said.
The Autorite des Marches Financiers on Tuesday fined the firm €75 million, fined Mr. Crastes €15 million and sanctioned him, and fined Group CIO Vincent Chailley €3 million. The fines were the result of a decision by the AMF's enforcement committee that the firm and management were in breach of investment rules related to purchasing unlisted securities, were in breach of investment rules related to buy and sell-back transactions involving non-eligible securities, and had not complied with an investment ratio for the funds.
The fines relate to seven French UCITS funds and investments in financial instruments issued by companies of Tennor Group. The AMF launched an investigation in November 2019.
H2O said it will lodge an appeal with the AMF's Conseil d'Etat "based on the legal and factual elements of the case," adding that it is contesting allegations of non-compliance with investment rules and that there was an "absence of any intentional error" by the company and Messrs. Crastes and Chailley. H2O added in the news release that "the sanctions appear disproportionate and completely unprecedented."
Ahead of the appeal process, H2O AM has adapted its governance in the interim. Mr. Guilloux, previously co-CEO of the group alongside Mr. Crastes, is now sole CEO. The firm also handed the management of its multibonds FCP strategy, run by Mr. Crastes, to portfolio managers Thomas Delabre and Philippine Watteaux. Ms. Watteaux was already co-manager on the fund.
The release added that there will be no change to the investment process, that the sanctions do not relate to the firm's current open-end collective investment funds — known as FCPs — which were launched in October 2020, and that H2O has also already committed to no longer invest in private securities.