Asset manager H2O AM LLP will pay 250m Euros (£214.8m) to investors unable to access their funds since 2020, following an investigation by the FCA.

The pay outs will be paid to investors in place of a fine for breaching FCA rules.

The asset manager has also agreed to stop operating regulated business in the UK.

The FCA investigation found that 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, or other companies he introduced.

The 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.

According to the regulator H2O also provided false and misleading statements and documentation such as fabricated records and minutes of meetings.

Steve Smart, joint executive director of enforcement and market oversight at the FCA, said: “H2O’s job was to manage its funds properly and protect investors. It failed to do this and, to make matters worse, it repeatedly provided misleading information to the FCA.  

“Through this settlement the FCA has secured money for affected investors and agreement that H2O will stop operating regulated business in the UK.”

H2O has also agreed to waive its rights to fees and investments totalling 320m Euros, and said it will apply to cancel its UK authorisation by the end of the year.

The French financial services regulator, the Autorité des marchés financiers (AMF), is the designated regulator in respect of the collective investments, which H2O managed on a cross-border basis pursuant to the UCITS Directive, and the FCA is the designated regulator of H2O.  

The AMF has also issued a penalty to H2O which is currently subject to appeal.