Investment firm Janus Henderson has been slapped with a £1.9 million fine by the City watchdog after misleading and overcharging more than 4,700 investors over almost five years.
The Financial Conduct Authority (FCA) said Henderson Investment Fund Limited failed to tell retail investors in two of its funds – the Henderson Japan Enhanced Equity Fund and the Henderson North American Enhanced Equity Fund – that it was switching to a more passive management strategy.
It had informed most of the large, institutional investors of the changes and offered to manage the funds for them without charge.
But retail investors were left in the dark about the changes and carried on paying the same fees as if they were still actively managed funds even though they were being run as “closet trackers” for nearly five years, according to the FCA.
The FCA said 4,713 retail investors were affected, along with 75 brokers and financial advisers and two institutional investors, between 2011 and 2016.
They were effectively charged £1.8 million more than if they have been invested in a passive fund, the FCA said.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “In this case, retail investors paid fees for active investment management they did not receive.
“For retail clients, the Japan and North American Funds were in effect operating as ‘closet trackers’ as the fees charged to them were inappropriate given the diminished level of active management.”
The regulator said the issue had brought to light “serious weaknesses” in Henderson’s management and governance of an area of its business, which included the Japan and North American funds.
These failings led to the issue going unnoticed for so long, added the FCA.
Henderson has since contacted and compensated all affected investors.
It would have been fined £2.7 million, but received a 30% discount on the penalty for co-operating with the regulator.
A spokesman for Janus Henderson said the failings happened before it was created through the merger of Henderson Global Investors and Janus Capital Group in 2017 and insisted the group has since improved its systems and controls.
He said: “Janus Henderson Investors accepts the FCA’s findings and the financial penalty and has co-operated fully throughout the process.
“Affected clients had already been separately contacted and fully compensated.”