French regulator the Autorité des Marchés Financiers has set out recommendations against H2O Asset Management following the fallout from Lars Windhorst-linked illiquid bonds, seeking more than €90m in fines.
The record amount would see the asset manager fined €75m, with co-founder and chief executive Bruno Crastes fined €15m, alongside a further €3m for chief investment officer Vincent Chailley.
This comes more than two years after H2O AM suspended a trio of funds at the request of the AMF, owing to its "significant exposure" to private securities which were tied to German financier Lars Windhorst, as revealed by the Financial Times.
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After a short period, the funds were reopened with €1.6bn of these illiquid bonds segregated in side-pocketed funds, which remain unsold.
At a hearing of the AMF enforcement committee, an official of the French regulator argued that there had been "grave deficiencies" in the firm's investment process. They noted in particular, H2O AM was not authorised to invest in such assets in open-ended retail funds.
A representative for H2O AM described the proposed fines as "disproportionate," while Crastes said that "everything was done in the interests of investors".
H2O also remains under investigation by the Financial Conduct Authority over its sale of illiquid stocks and bonds to Windhorst.
