Solidar Fonder AB, the asset management company with AUM of some SEK20bn (€1.92bn) across 20 investment funds, has been hit with a SEK10m (€0.96m) fine from Finansinspektionen (FI), the Swedish Financial Supervisory Authority over failures to manage conflicts of interest regarding actions taken on behalf of unit holders, and failures in procedures, risk assessment and risk management.
With about 75% of its assets managed in the Swedish Premium Pension system, there are over 68,000 long term savers in the manager’s funds on the PPM platform, according to the Swedish Pensions Agency.
FI said that Solidar and DS Platforms co-developed a derivative intstrument, and that Solidar “then entered into a large number of transactions in the derivative instrument with DSP for some of Solidar’s funds.”
“There were conflicts of interest to manage with regard to the cooperation and the trade in the derivative instrument. For example, members of the board of directors of Solidar had economic interests in DSP. FI’s investigation shows that Solidar did not manage the conflicts of interest. This has introduced a clear risk that the company’s own economic interests have been placed before those of the unit holders.”
“Solidar also did not take sufficient measures to ensure that it conducted trades exclusively in the interest of its unit holders since the company had deficient evaluations of various management strategies. The company also had deficient procedures and controls for risk assessment and risk management of the investigated funds.”
“The rules regarding conflicts of interest and taking action exclusively in the joint interests of shareholders are some of the most central rules that fund management companies are obligated to follow. They play a fundamental role in protecting investors and maintaining confidence in the fund market.”
FI noted that trading with DSP has ceased and Solidar has implemented measures such as clarifying internal regulations, and made changes to its board and management.