Scandal and scrutiny

The collapse of Neil Woodford’s equity management fund is one of the great financial scandals of recent years and will leave thousands of investors out of pocket. There is prima facie evidence that the difficulties it was facing were flagged up to the City regulator, the Financial Conduct Authority (FCA), but it did nothing about it. Some industry figures have accused it of having been “asleep at the wheel”.

Most people, whether investors or not, would therefore expect the FCA to examine its own role and see what went wrong to ensure it did not happen again. Yet the authority has decided not to commission an independent review of its actions leading up to the fund’s closure. The Woodford debacle raises so many questions that it is impossible to understand the FCA’S reticence unless it has something to hide.

Why, for instance, were fund platforms allowed to puff the Woodford schemes in their “best buy” category, encouraging small savers to invest when there was apparent commercial advantage to both in doing so?

Should this be allowed or more tightly controlled? There needs to be transparency and accountability to the regulator. Otherwise, what is the point of having one? But the question of whether the FCA should have spotted the dangers a long time ago – and acted on them if it did – will not go away.

Some wealth managers were warning four years ago about the risks inherent in what were supposed to be relatively safe income-generating funds. If the FCA is not going to hold an inquiry, then the Commons Treasury Select Committee should do it instead.