The Financial Conduct Authority (FCA) found that Capita Financial Managers (CFM) breached industry principles after it failed to conduct adequate due diligence on the fund, which went into liquidation on December 2012.
CFM was also found to have failed to rectify the issue when alerted, did not adequately monitor the fund and failed to communicate its processes to investors in a way that was fair and not misleading.
The fund, which was an unregulated collective investment scheme, was intended to provide short-term bridging finance to commercial operators in the UK property market. It was managed by CFM between 2008 and 2009.
“The aim of the payment announced today is to return the amount originally invested, placing investors as closely as possible back into the position they would have been in if they had never invested in the fund,” Mark Steward, FCA executive director of enforcement and market oversight said.
In May this year, Big Four Firm PwC was fined £5m for misconduct in its audit of the housing maintenance firm, which collapsed in 2010, saddling investors with debt.
The investigation in the audit of Connaught started in 2012, after auditors KPMG found 50,000 unprocessed invoices at the companies Leeds office.