The Financial Conduct Authority today (11 April) issued a warning notice statement outlining its concerns and the enforcement action it expects to take against high profile fund manager Neil Woodford and Woodford Investment Management (WIM).
Among its concerns, the UK regulator said Woodford “had a defective and unreasonably narrow understanding of his responsibilities for managing liquidity risks”.
The FCA said it found that between 31 July 2018 and the fund’s suspension on 3 June 2019, LFS failed to manage the liquidity of the fund – or how easily assets in the fund could be turned into cash – so that investors could access their money at short notice.
LFS also failed to properly oversee Woodford Investment Management (WIM) or to sufficiently ensure that concerns about liquidity were acted on.
In a separate action, the FCA said it issued warning notices to Neil Woodford and WIM proposing to take action against them for their conduct in the management of the Woodford Equity Income Fund (WEIF).
It also alleges that he and WIM failed to ensure that the WEIF’s liquidity risk framework was appropriate, to respond appropriately to the ongoing deterioration in the fund’s liquidity, and to maintain a reasonable liquidity profile for the WEIF.
The warning notices given to Woodford and WIM are not the FCA’s final decisions and both parties have the right to make representations to the Regulatory Decisions Committee, the statement continued.
“In the event that the FCA makes final decisions, it intends to make its findings public at the appropriate point, but it cannot provide any further detail beyond the warning notice statement at this stage, including about any proposed sanctions.”
The LFS final notice confirms the failings which led to the FCA’s investigation and subsequent agreement from LFS to settle the enforcement case and provide compensation to those affected.
Those invested in the WEIF when it was suspended are starting to receive a share of the up to £230 million redress scheme, which was approved by the High Court in February.
The FCA also confirmed that there are no other parties under investigation in relation to the Woodford Equity Income Fund.
Therese Chambers, joint executive director of enforcement and market oversight, said: “Link Fund Solutions’ job was to properly manage the Woodford Equity Income Fund and to protect investors’ interests. Their failings led to losses for those trapped in the fund when it was suspended.
“It is right that they compensate investors for the losses that resulted from their failings, and we’re pleased that the scheme has started making payments.”
In reaction, WilmerHale and BCLP, representing Woodford and Woodford Investment Management, said in a statement that the FCA’s findings were “fundamentally misconceived” and vowed to challenge them.
