Invesco AMC is under probe for allegations of Misappropriation of Debt Schemes

Invesco mutual fund is facing a probe after a whistle-blower claims mismanagement in some fixed income schemes of Invesco AMC. A complaint has been filed with the financial market regulators – Securities and Exchange Board of India (SEBI) and the US Securities Exchange Commission (US SEC). The complainant has also filed a complaint with the Bombay High Court.

The whistleblower has made three allegations against Invesco AMC

• The first allegation is that the Ex-Fixed Income CIO of Invesco Mutual Fund (India) acted as an advisor to Invesco’s offshore PMS focused on Indian Debt. As per SEBI guidelines, there must exist a Chinese Wall between a PMS and Mutual Fund. The Chinese Wall is essentially a virtual barrier to prevent sharing of information that might lead to ethical or legal violations
• The Second allegation is related to the execution of trades. It alleges that the Fixed Income team of Invesco Mutual Fund (India) executed trades for offshore PMS. The regulations require the execution to be done by offshore counterparts.
• The third allegation emphasizes the post IL&FS default period. It is alleged that the Fixed Income team of Invesco Mutual Fund (India) identified certain securities like DHFL which were likely to come under stress and initiated an inter scheme transfer of the same to their offshore funds in an attempt to hide bad investments. Currently, inter scheme transfer is not legal.

The Whistleblower was dismissed in 2021. The whistleblower was filed in just 3 to 5 days after he filed the complaint, which was against the Whistleblower Policy. The officials of Invesco have told SEBI that the AMC had observed certain violations by the whistleblower and they were anyway going to dismiss him. However, as per sources, Invesco AMC has not been able to produce any case details or convincing papers regarding the alleged violations by the whistleblower

In addition to this, the employees of Invesco did not cooperate with the SEBI in sharing data and emails and casually said that the data has been deleted due to a malware attack. After this, SEBI sought for the malware policy of AMC and summoned a senior technology official from the Atlanta Headquarters.

Invesco’s response to allegations

When contacted, a spokesperson for Invesco responded to the allegations, “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. This includes global oversight and independent, impartial review.”

“We cooperate with any regulatory inquiries (including any examinations or investigations) in a manner that is transparent and consistent with global best practices. As part of corporate policy, it will be inappropriate for us to divulge any individual or employment details of any of our 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 another governing document,” the spokesperson added.

As of Mar 2022, Invesco AMC (India) has an AUM of Rs.43,916 crores of which nearly 32% allocation is in debt. Out of the total debt, the fund house has just 2% exposure to AA/AA+/AA- rated papers and the rest of the debt allocation is in sovereign bonds, AAA, A1, and equivalent rated papers. Currently, Invesco Mutual Fund has 11 debt schemes. Invesco India Liquid Fund and Invesco India Corporate Bond Fund are its largest debt funds managing assets worth Rs.3,932 crores and Rs.3,188 crores respectively.