H2O Asset Management, formerly owned by French firm Natixis, will pay €250 million ($273 million) to investors unable to access their funds since 2020, following an investigation by the U.K.’s Financial Conduct Authority.
H20 and the FCA also confirmed that the asset manager will cease its U.K. operations. According to H2O, it will continue to maintain offices in offices in Paris, Monaco, Geneva and Singapore.
According to an FCA release, 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, a German multimillionaire who has faced previous legal issues such as having filed for bankruptcy. The FCA release stated these 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.
In December, H2O and Natixis were among firms targeted in a French lawsuit seeking €717 million over losses stemming from a scandal over illiquid investments at the fund boutique.
H2O also provided false and misleading statements and documentation to the U.K. regulator, such as fabricated records and minutes of meetings, according to the FCA. The regulator also stated that it would have have imposed a “substantial fine” on H2O for its breaches, instead agreeing that H2O will make €250 million available to all those whose investments remained trapped. H2O has also waived its rights to fees and investments totaling €320 million and will apply to cancel its U.K. authorizations by the end of the year.
According to a news release from H2O, €229 million has already been already repaid to investors prior to the €250 million agreed with the FCA. As a result, those investors who sold their units in October 2020 when the funds reopened will recover between 87% and 93% of the value of their total investment at the time of suspension on Aug. 28, 2020, depending on the fund.
Loic Guilloux, chief executive of H2O, said in a news release: "With this settlement, we acknowledge the FCA's findings relating to investments in private securities undertaken by H2O between 2015 and 2019 and take a major step forward. Over the last few years, we have significantly improved and consolidated our organization and strengthened our risk management and compliance teams, governance and internal procedures.”
The French financial services regulator, the Autorite des marches financiers, fined H20 €75 million in January of this year, which is subject to appeal.
Natixis sold its 50% stake in H2O in March 2022.
