Aviva fined £17.6 million over fixed income trades

Aviva Investors has been fined £17.6 million for failing to manage conflicts of interest in its fixed income trading team between August 2005 and June 2013.

Aviva Investors has been fined £17.6 million for failing to manage conflicts of interest in its fixed income trading team between August 2005 and June 2013.

The Financial Conduct Authority confirmed the fine had been reduced from £25.2 million – a reduction of 30% – because Aviva Investors agreed to settle at an early stage.

The company had allowed certain desks in the fixed income team to manage multiple funds, which were paid different levels of performance fees by different funds.

A percentage of these fees were then paid to traders in the Aviva Investors fixed income division, which led to conflicts of interest as traders were effectively incentivised to favour one fund over another.  

The company did spot this activity and recorded it in its internal log, but the regulator has since found weaknesses in the systems monitoring the bad practice which meant traders could delay recording the allocation of executed trades for hours at a time.

In delaying the declaration, traders could assess a trade’s performance during the course of the day and, when it was recorded, allocate trades that benefitted from favourable intraday price movements to one fund and trades that did not to other funds- a practice known as ‘cherry picking’.

In a statement to the market, Euan Munro, chief executive officer of Aviva Investors, said: “We fully accept the conclusions of this investigation. We have fixed the issues, improved our systems and controls, and ensured no customers have been disadvantaged.

“We have also made substantial changes to the management team which is leading the turnaround of Aviva Investors.”

In its summary statement, the FCA said the case served as an important reminder to firms of the importance of managing conflicts of interest. 

Georgina Philippou, acting director of enforcement and market oversight at the FCA, said: “Not doing so risks customers’ interests being overlooked in favour of commercial or personal interests.”  

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