Whistle blower alleges wrongdoings at Invesco MF, complains to regulators

Invesco Mutual Fund has been rocked by reports of whistle blower allegations of mismanagement in its fixed income schemes during 2018-19, sources said.

The allegations pertain to wrongdoings by the fixed income team, according to people familiar with the matter. The whistle blower has filed complaints with the Securities and Exchange Board of India and the US Securities and Exchange Commission.

The first allegation is that the former chief investment officer of Invesco MF’s fixed income schemes also acted as an advisor to its offshore portfolio management services focussed on Indian debt. As per Sebi guidelines, there should be a Chinese wall between portfolio management services and mutual funds, which means different personnel, different systems and different trade execution. The CIO was said to have resigned in 2019.

The second allegation is centred on the execution of trades. It was alleged that Invesco India’s fixed income team executed trades on behalf of their offshore funds, in violation of regulations requiring the execution to be done by the offshore counterparts because their relationship was advisory in nature.

The third allegation is that after the default by Infrastructure Leasing & Financial Services in 2018, the fixed income team of Invesco MF identified securities of other companies including Dewan Housing Finance Corporation Ltd. that were likely to come under stress and transferred them to the offshore funds. While the transfer itself was not illegal at the time, the matter of concern was that the clean-up was done at the cost of offshore clients.

Conduct unbecoming

The whistle blower, who used to manage three schemes for Invesco MF, is said to have first raised the issue with the senior management and on the internal Invesco hotline. Due to the slow progress of the internal investigations, the whistle blower approached Sebi and the US regulator, the people said.

Soon after, the whistle blower was dismissed in July 2021 for conduct unbecoming, having taken on additional responsibilities in December 2020. The whistle blower then filed a civil suit for wrongful termination in the Bombay High Court.

Invesco MF, which had Rs 55,622 crore of assets under management at the end of December, said it has systems in place to look into allegations of improper conduct and cooperates with regulatory inquiries.

“As is appropriate for a global financial services company, Invesco maintains policies and procedures for investigating allegations of improper conduct received from any source. Invesco always handles such matters in an appropriate manner, consistent with global best practices,” Invesco said in its response to Moneycontrol. “This includes global oversight and independent, impartial review. Invesco seeks to maintain excellent relations with all our regulators. We cooperate with any regulatory inquiries (including any examinations or investigations) in a manner that is transparent and consistent with global best practices.”

Invesco MF said as part of its corporate policy, it would be inappropriate to divulge any individual or employment details of any employees.

“Our portfolios and business remain unaffected. All Invesco funds and investment strategies operate under our global risk management framework and invest according to the parameters and guidelines set out in the relevant prospectus or other governing document,” it said.

Moneycontrol is awaiting a response from Sebi.