In August 2024, the FCA issued a public censure against H2O Asset Management LLP (H2O) for serious failures in managing high-risk investments between 2015 and 2019. The company, managing funds totaling €34 billion at its peak, invested €1.64 billion into illiquid private placements linked to controversial financier Lars Windhorst. H2O’s insufficient due diligence and failure to manage conflicts of interest led to significant losses for investors. As part of the settlement, H2O has secured €250 million to compensate current unitholders of the side-pocketed funds.
The FCA found that H2O failed to comply with key regulatory principles, including:
- Due Skill and Care: H2O did not conduct adequate due diligence when making high-risk investments.
- Risk Management: The firm lacked proper risk controls, exacerbating investors’ exposure to illiquid assets.
- Transparency: H2O misled the FCA about its due diligence processes and the personal ties between its CEO and Windhorst.
In addition to the €250 million compensation, H2O has waived rights to €320 million in fees and investments. Furthermore, the company agreed to voluntarily cancel its regulatory permissions by December 2024.
This case highlights the FCA’s commitment to holding asset managers accountable, especially when investor interests are jeopardized by mismanagement and lack of transparency.
For more details, see the FCA’s final notice.
About Michael Rasmussen
Michael Rasmussen is the founder of United Atlantic Legal Services. He is a licensed attorney in Florida and registered solicitor in the United Kingdom. Michael has acted as General Counsel and Chief Compliance Officer to several investment advisers, including private fund managers, responsible for the management of billions of dollars in client assets.
Michael is also the founder of FinProLaw, an online learning platform where Michael has created courses designed for investment adviser compliance professionals. These courses include:
- Investment Adviser Compliance Essential for Chief Compliance Officers
- Foundations of Investment Adviser Compliance
- What is a “Security”?
- Investment Adviser Marketing Rule
- Regulation A – Exemption from Registration
- Regulation Crowdfunding – Exemption from Registration
- Regulation D – Exemption from Registration
Michael can also be found on LinkedIn.
Investment adviser firms who are also clients of United Atlantic Legal Services can receive many of these courses at a significantly reduced fee or, in some cases, at no expense. Contact us today or visit the FinProLaw to learn more.