India Bond Fund issue: Hong Kong regulator penalises Invesco

PALAK SHAH | | Updated on: Jul 21, 2022
Invesco is being investigated by regulators in multiple jurisdictions globally for alleged misappropriation of fixed income schemes 

Invesco is being investigated by regulators in multiple jurisdictions globally for alleged misappropriation of fixed income schemes  | Photo Credit: JHVEPhoto

SEBI, too, likely to issue show-cause notice, say sources

The Hong Kong Securities and Futures Commission has penalised Invesco Hong Kong (HK) for mismanagement of Invesco India Bond Fund, sources told BusinessLine. Invesco HK is the parent of Invesco Mutual Fund (MF) in India, which is registered with market regulator SEBI. A show-cause notice by SEBI, too, is likely to be issued to Invesco officials, the sources said.

Invesco is being investigated by regulators in multiple jurisdictions globally for alleged misappropriation of fixed income schemes after an Indian whistleblower filed complaints with regulators in the US, India, Hong Kong and few other jurisdictions. In India, Invesco manages assets worth more than ₹50,000 crore. Investigations so far have revealed that Invesco MF India undertook several inter-scheme transfers (ISTs) between 2016 and 2021, specifically aimed at moving papers with ‘poor fundamentals’ into retail-oriented schemes at the time of heightened credit risk. The whistleblower has alleged that Invesco fund managers in India were the conduits to move bad investments from Indian schemes to offshore jurisdictions and also divert them to retail oriented schemes in India. Invesco is also said to be in violation of SEBI’s management of advisory norms.

Invesco India Bond Fund is registered under SICAV in Luxembourg. Invesco Hong Kong Ltd. is the designated investment manager for the fund and had appointed Invesco MF India as a non-binding advisory according to the presentation of the fund available on records. Invesco India Bond Fund has investments in securities denominated in rupee. The whistleblower has alleged that Invesco MF India did not only provide investment advice to the HK fund, but also executed the trade deals in violation of SEBI norms. Invesco HK lacked the necessary oversight.

Apart from the HK regulator, the Financial Conduct Authority (FCA) in the UK is also actively investigating Invesco and its group subsidiaries for the same matter, where Invesco India Bond Fund has investors and holds a limited marketing license to sell the fund. The whistleblower, who was a fund manager and dealer with Invesco India Mutual Fund, was dismissed from employment in July 2021 after he filed a complaint with the US Securities & Exchange Commission (SEC).

The whistleblower has also filed a civil suit in the Bombay High Court (HC) for unlawful dismissal which is pending listing. The filings in the Bombay HC contains evidence of alleged malfeasance including copies of whistleblower complaints filed to regulators, internal emails of Invesco and audio recordings, the sources said.

Published on July 21, 2022
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