The latest in a series of hefty fines levied by financial regulator the CSSF has fallen on a fund manager with strong links to the Fuchs & Associés saga, featuring millions in fines for financial malfeasance.
Luxembourg’s regulator in December 2024 imposed a nearly 700,000 euro fine on Funds Avenue, S.A., a company owned by a partnership involving the son of Fuchs senior and Amsterdam-based Trustmoore, both of whom seem eager to distance themselves from their corporate history. The fine was announced on 30 January.
“The CSSF did not identify major weaknesses in the key functions of Funds Avenue, including portfolio management, compliance (including anti-money-laundering and counter-terrorism financing) risk management, valuation or distribution,” declared Funds Avenue and Trustmoore in a joint response to Investment Officer’s query.
This statement appears somewhat surprising in light of how the CSSF justified their large fine.
History of hefty fines
The CSSF had issued Fuchs & Associés, founded by former CSSF board member Jean Fuchs, over two million euros in fines for various failings of the financial regulations, including tax fraud and money laundering. Facing financial dissolution, Fuchs sold off its asset management unit, which came to be controlled as Fuchs Asset Management by Fuchs’ son, Timothy.
The CSSF on-site inspection, explained Lucie Fischbach, Funds Avenue’s chief compliance officer, “took place in the context of the capital being brought by new shareholders, after the former sole shareholder of Funds Avenue S.A. had been put under judicial liquidation.” Based on the timeline, she was referring to none other than Fuchs & Associés, prior to the Trustmoore deal.
Despite the family and financial ties, both firms sought to distance themselves. “We would like to clarify that measures imposed on Fuchs & Associés Finance S.A. are in no way related to Trustmoore and/or Funds Avenue,” explained Pieter Ottevanger, Trustmoore’s marketing director in an email sent Wednesday morning.
Same hymn book
Trustmoore took the unusual step of aligning their response to Investment Officer with that of Funds Avenue. Ottevanger’s response was a forwarded version of an email from Lucie Fischbach, Funds Avenue’s chief compliance officer.
That inspection led to a large fine “for non-compliance with professional obligations related to general organisational requirements and rules of conduct,” said the CSSF.
The CSSF decision noted that Funds Avenue “failed to act honestly and fairly in conducting its business activities in the best interest of the managed Ucits” and “to act with due skill, care and diligence, in the best interest of the Ucits it manages.”
Practices questioned
Further, Funds Avenue “did not try to avoid conflicts of interests and failed to ensure that the Ucits it manages are fairly treated when conflicts of interests cannot be avoided.”
The CSSF also pointed out that Funds Avenue “participated in setting up a transactions fees retrocessions scheme through a business introducer agreement, benefiting a company that provided none of the services mentioned in the said agreement.”
Retrocession fees are payments made by financial intermediaries, such as fund managers or investment firms, to intermediaries like financial advisors, brokers or distributors.
Failing to ensure
It so transpired, according to the CSSF, that “one of the Manager’s executives had close ties with the responsible person at the company benefiting from those transactions fees retrocessions.”
The CSSF also took issue with Funds Avenue’s “shortcomings” in monitoring delegated portfolio managers “with regards to the best execution policy”, finding the firm “did not ensure the effectiveness” of the policy.
The CSSF also identified several invoices or expense claims paid by Funds Avenue for services/benefits that “are not related to its business activity,” including private jet expenses for the personal trips of an executive committee member and his close family. There were also payments made to cover “the maintenance of private vehicles”.
Looking to the future
Funds Avenue and Trustmoore found it significant to note that they had “actively cooperated with the Commission [the CSSF], taken all appropriate measures to remediate weaknesses identified, showing the Company took its responsibility and acted diligently in maintaining its processes robust.”
With this last fine paid—“posing no impact on the financial stability and ongoing activity of the Company”—both firms are trying to face the future positively.
“With a robust governance framework in place and the new ownership structure including where Trustmoore stands alongside the management team, the Company is well-positioned for future growth and to continue delivering value to its clients and their investors.”