FCA blasts ‘defective’ Woodford for failings

FoRMER star stock picker Neil Woodford faces an unlimited fine and a City ban after regulators accused him of a series of failings ahead of the collapse of his investment empire.

The Financial Conduct Authority (FCA) warned Woodford that it was preparing enforcement action following a long-running investigation into the demise of his Woodford Equity Income Fund in 2019.

It said he had a ‘defective and unreasonably narrow understanding’ of his responsibility for managing ‘liquidity risks’ – the need to be able to turn assets into cash.

The warning notice comes after 300,000 savers had £3.7bn trapped in the fund when it was shuttered in June 2019.

It is the first time the FCA has made public its preliminary findings about Woodford’s role – and his lawyers said they would challenge them. The regulator could take around a year to decide what if any action to take against him – a decision which could then be subject to an appeal.

Woodford’s company Woodford Investment Management (WIM) was also named in the FCA’s warning notice.

The saga began after savers entrusted their money to the fund manager, who made his name at Invesco before setting up on his own in 2014.

At its peak, the fund was worth more than £10bn. Woodford ( pictured) was once described by the BBC as ‘the man who can’t stop making money’.

But his decision to invest in small, unlisted companies proved his downfall. After they started to underperform, savers rushed to exit and the fund was suspended, leaving those who had not cashed out stranded. The FCA outlined allegations including that Woodford’s company took ‘unreasonable and inappropriate investment decisions’ even in the face of an investor exodus and failed to heed ‘warning signs’ about liquidity.

It alleged that failings between July 2018 and June 2019 ‘ materially increased the risk that the fund would need to be suspended and thereby place those investors who did not redeem prior to the point of suspension at a disadvantage’. WilmerHale and BCLP, the law firms representing WIM and Woodford, said: ‘WIM and Mr Woodford disagree with the FCA’s findings, which they believe are unprecedented and fundamentally misconceived.

‘The findings will be challenged by WIM and Mr Woodford.’

The FCA also published its final findings on the role that Link Fund Solutions, which was the fund’s supervisor, played in the collapse.

It said Link ‘failed to manage the liquidity of the fund... so that investors could access their money at short notice’.

Those in the Woodford fund at the time of its collapse are starting to receive their share in a £230m compensation scheme from Link, which was approved by the High Court in February.

The regulator said it would have imposed a £50m fine but this would have reduced the amount investors receive back.

It added that no other parties are under investigation over the scandal.