OFI Asset Management has been fined €300.000 by the French market regulator for failings in its due diligence process which led the firm to hold a number of funds linked to convicted fraudster Bernard Madoff.
The AMF also issued a €30.000 fine each to two of the Paris-based firm's directors at the time of events, current CEO Gérard Bourret and former deputy CEO Thierry Callault who left the firm in March 2012.
Following an investigation by the French regulator which began in mid-2009, it found that at the time the ponzi scheme was discovered in December 2008, four funds from OFI’s alternative multi-management division were invested in Madoff vehicles.
The verdict from the AMF declared that the French firm had shown a ‘lack of professionalism and diligence in the investment and monitoring of the funds concerned in the “Madoff fraud”’, according to the French regulator’s report.
The firm, which runs €52 billion, declined to comment on the verdict when contacted by Citywire Global.
Among other criticisms voiced by the AMF regarding OFI AM's handling of the ‘Madoff risk’ were:
- Shortcomings in the monitoring and adherence to regulatory ratios
- A lack of management of conflicts of interest for subscriptions and operations between funds for OFI AM, involvement of funds managed by the alternative multi-management unit of the firm and operations undertaken between the directors of OFI AM the FCPR fund Investir
- Irregularities in the sales of a foreign investment fund, related to marketing activities in the absence of prior permission, and the release of incorrect and misleading information.
In December 2008 the firm’s alternative multi-management unit advised twelve funds, of which four - the X1, X2, Alternatifs 1818 and the Oval Alpha Palmarès funds - were invested in funds exposed to the ‘Madoff risk’.
These Madoff-linked funds included the Herald Structured Funds through the Leveraged Swap Segregated Portfolio One as well as the Fairfield Sentry, Herald USA Structured Portfolio One and the Platinum All Weather Fund which were no longer included in OFI’s portfolios at the time of the discovery of the fraud.