On February 24, 2015, the Financial Conduct Authority imposed a fine of £17.6 million on Aviva Investor Global Services Ltd for failing to manage conflicts of interest fairly between its customers, and between itself and its customers. Aviva used a "side-by-side" approach in the management of some of its desks, which meant that the same desks were used in the management of funds paying out different levels of performance fees. This structure created conflicts of interest, as traders were incentivized to favor certain funds over others. Weaknesses in the Aviva systems and processes were found which meant that traders were able to delay recording the allocation of executed trades for several hours. Traders who managed funds on a side-by-side basis could evaluate trade performance during the course of the day and, when recorded, allocate trades with favorable intraday price movements to one fund, and trades with unfavorable movements to others, which amounted to an abusive practice generally known as "cherry picking." Compensation in the sum of £132,000,000 has already been made by Aviva to the eight funds it identified as possibly having been adversely affected by its failings.
The FCA's final notice is available at: http://www.fca.org.uk/static/documents/final-notices/aviva-investors.pdf.
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