Finansinspektionen (FI) is issuing Solidar Fonder AB (Solidar) a warning. The company must also pay an administrative fine of SEK 10 million.
FI's investigation shows that Solidar has demonstrated serious deficiencies in how it manages conflicts of interests, the actions it takes in the interest of its unit holders and its procedures and controls for risk assessment and risk management.
Solidar and DS Platforms Ltd (DSP) developed a derivative instrument together. Solidar then entered into a large number of transactions in the derivative instrument with DSP for some of Solidar's funds. There were conflicts of interest to manage with regard to the cooperation and the trade in the derivative instrument. For example, members of the Board of Directors of Solidar had economic interests in DSP. FI's investigation shows that Solidar did not manage the conflicts of interest. This has introduced a clear risk that the company's own economic interests have been placed before those of the unit holders.
Solidar also did not take sufficient measures to ensure that it conducted trades exclusively in the interest of its unit holders since the company had deficient evaluations of various management strategies. The company also had deficient procedures and controls for risk assessment and risk management of the investigated funds.
The rules regarding conflicts of interest and taking action exclusively in the joint interests of shareholders are some of the most central rules that fund management companies are obligated to follow. They play a fundamental role in protecting investors and maintaining confidence in the fund market.
Solidar has taken measures, and is planning to take additional measures, to rectify the deficiencies. The trading with DSP has been terminated, and the company has clarified its internal regulations. The company has also made changes to its Board of Directors and management. Given these measures, FI finds it sufficient to issue Solidar a warning and an administrative fine of SEK 10 million.
Solidar is a fund management company with approximately 20 investment funds. As of 31 March 2018, the company managed capital of approximately SEK 20 billion, of which around 75 per cent is in the premium pension system. According to the Swedish Pensions Agency, there are approximately 68,000 pension savers in Solidar's funds.