Neil Woodford, the previous star fund supervisor, and his funding administration agency, Woodford Funding Administration (WIM), have been fined £46 million by the Monetary Conduct Authority (FCA) for failures in managing the Woodford Fairness Earnings Fund (WEIF), which collapsed in 2019.
The penalties encompass a £5.89 million high quality for Woodford personally, alongside a £40 million high quality for WIM. Along with the monetary penalties, Woodford has been banned from holding senior administration roles or managing funds for retail traders.
The FCA’s findings give attention to Woodford and WIM’s administration of the WEIF, which noticed the fund’s worth drop from a excessive of £10.1 billion in Could 2017 to £3.7 billion by the point it was suspended in June 2019.
The suspension, which left round £3.7 billion of belongings trapped, got here after traders tried to withdraw their cash, citing issues over the fund’s excessive publicity to illiquid belongings.
The FCA concluded that Woodford and WIM made “unreasonable and inappropriate funding selections” between July 2018 and June 2019, together with disproportionately promoting liquid belongings and buying illiquid ones.
By the point of the suspension, solely 8% of the investments may very well be offered inside seven days, violating the rule that traders ought to have entry to their funds inside 4 days.
Woodford and WIM failed to reply appropriately because the fund’s liquidity deteriorated and traders continued to withdraw their cash.
The regulator discovered that the agency didn’t take adequate motion to mitigate these dangers or present oversight on the fund’s administration, notably its relationship with Hyperlink Fund Options (LFS), the agency overseeing the fund’s liquidity.
Steve Good, joint govt director of enforcement and market oversight on the FCA, said:
“Mr Woodford merely doesn’t settle for he had any position in managing the liquidity of the fund. The very minimal traders ought to count on is these managing their cash make wise selections and take their senior position severely. Neither Neil Woodford nor Woodford Funding Administration did so, placing in danger the cash individuals had entrusted them with.”
WIM disagreed with the FCA’s findings, asserting that the fund was managed consistent with a liquidity framework set by Hyperlink Fund Options, which the FCA had beforehand accepted.
In an announcement, WIM claimed that Hyperlink’s actions, notably the “disorderly fireplace sale” of belongings, had been the true reason for investor losses after the suspension.
“We strongly disagree with the FCA’s determination,” stated WIM in its response. “Mr. Woodford managed the fund inside a framework designed to make sure adequate liquidity. Neither Hyperlink nor the FCA raised issues or initiated discussions about liquidity administration through the 5 years of managing WEIF.”
Woodford, for his half, denied deceptive traders. “We couldn’t have been extra clear in regards to the technique, what we had been doing, and the way the fund was made up,” he informed Metropolis AM.
The collapse of the WEIF has sparked ongoing requires Woodford to lose his CBE (Commander of the Order of the British Empire), which he obtained in 2015 for his companies to enterprise and funding.
In an open letter to the Honours Forfeiture Committee, each the Woodford Marketing campaign Group and the Transparency Activity Pressure referred to as for Woodford’s honours to be revoked.
Andy Agathangelou FRSA, co-founder of the Woodford Marketing campaign Group, stated:
“Given the FCA’s important judgment of Mr. Woodford, I consider there isn’t a longer a cause to delay making a choice on his CBE. I hope the method is each easy and swift.”
The FCA’s ruling, whereas nonetheless provisional, has been met with widespread scrutiny, notably relating to the broader implications for regulatory oversight within the funding sector.
The case additionally raises questions in regards to the obligations of fund managers to make sure the liquidity of their funds and the transparency of their operations.
