Natixis Investment Management (Natixis IM) has finalised a deal to sell its majority stake in scandal-hit asset manager H2O.

Under the agreement, Natixis will initially offload 26.61% of its holdings in H2O and will sell the remaining 23.4% in four to six years after securing ‘the necessary regulatory approvals’.

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H20 is currently under investigation by the UK’s Financial Conduct Authority (FCA) and other regulators for scandals in connection with risk controls.

The money manager came under the regulatory lens in 2019 after it was found that it invested over €1bn of investor money into illiquid bonds linked to a controversial financier Lars Windhorst.

Natixis IM decided to cut its ties with the troubled asset manager in 2020 as part of a strategy to increase risk controls under CEO Nicolas Namias.

Last year, a plan by the French investment bank to sell back its stake to H2O’s management faced pressure from regulators, who did not want H2O co-founders to own a bigger share of the firm.

After the completion of the finalised transaction, Natixis IM will not be represented on the board of directors of any H2O AM group company.

Following the wind-down of the partnership, 40 employees of H20 will hold a stake in the asset manager, bringing the number of employee shareholders to almost half the company.

There will not be any change in the share capital held by the two founders.

In addition to the deal, the companies have announced several measures to strengthen the governance H2O.

This includes the introduction of a supervisory board, with a majority of independent members for all its Europe-based investment management firms.

Natixis IM and H2O also agreed to transfer the distribution, communications, customer service and marketing activities of the investment management firm to the latter’s Investor Relations team.