By Suzi Ring

Aviva plc was fined 17.6 million pounds ($27.2 million) by the U.K. financial markets regulator for failing to manage conflicts of interest among funds in its fixed-income business.

From August 2005 to June 2013, Aviva served funds that paid different performance fees from the same desks, a system that led traders — who received a share of the fees — to favor those that paid more. A group of traders made 27.4 million pounds over the period thanks to higher fees from hedge funds, the U.K. Financial Conduct Authority said in a statement Tuesday.

Aviva paid eight funds 132 million pounds in March 2014 after finding two former fixed-income traders had handled some trades improperly. The London-based insurer, which is Britain’s second-largest by market value, notified the regulator when it uncovered the misconduct and disclosed the policy breach in March.

This case is a “reminder to firms of the importance of managing conflicts of interest effectively by implementing a robust control environment with effective systems,” Georgina Philippou, the FCA’s acting director of enforcement and market oversight, said in the statement. “Not doing so risks customers’ interests being overlooked in favor of commercial or personal interests.”

Under Aviva’s structure, hedge funds, which could pay as much as a 20 percent performance fee, could be managed along with long-only funds, which paid much less, according to the FCA. Traders could delay the allocation of trades and watch their performance during the day before deciding to place them in a different fund to receive more fees, the FCA said.

“We fully accept the conclusions of this investigation,” Aviva Investors Global Services Chief Executive Officer Euan Munro said in a statement. “We have fixed the issues. We have also made substantial changes to the management team, which is leading the turnaround of Aviva Investors.”

Aviva received a 30 percent reduction in the penalty in exchange for its early cooperation, the FCA said.

–With assistance from Sarah Jones in London.

Copyright 2015 Bloomberg.