The Financial Services Authority has banned a former fund manager at BlueBay Asset Management and fined him £140,000 for deceiving investors by mis-marking funds he managed.

During 2008 he cut and pasted figures onto original broker quotes used in the valuation process of assets in the funds he managed. The deliberately altered quotes led to an uplift in the independent valuation of the funds of approximately $27 million.

Jérôme de Lavenère Lussan, Founder and CEO of investment management consultancy Laven Partners comments: “Investors must be protected from problems like these and this can be achieved, provided companies put in place robust systems and controls. Investors can protect themselves by checking the efficiency of such systems and controls through due diligence.

“This case proves that even if the fund has an independent administrator, there remains a risk of the valuation process being usurped by the manager. Valuation agents, whether internal or external, must take responsibility for cross-checking data from original sources, such as prime broker statements, to avoid such abuse.

“Investors believe that if a fund employs a third party administrator, valuations will be fair and accurate. However contracts between managers and administrators are not strict enough. We believe that a standard contractual agreement between fund managers and administrators is required, which should stipulate that the administrator must consult an agreed number of recognised third party pricing mechanisms to verify asset valuations.

“It is good that the FSA is taking steps to enforce and deter malpractice. However to continue to improve industry standards, the FSA must emphasise the importance of systems and controls at a management level. Compliance needs to be taken more seriously by people at all levels of financial institutions - this will benefit investors, and also protect fund providers’ themselves.