Neil Woodford fined £46m and BANNED six years after implosion of his investment firm

Daily Mail​

6 days ago

Former star fund manager Neil Woodford has been slapped with a multi-million pound fine and a ban from some top city roles, six years after the implosion of his investment firm.
The City watchdog on Tuesday issued a damning verdict of Mr Woodford's conduct and performance during the events that led to the collapse of the once-£10.1billion Woodford Equity Income fund.
Woodford Equity Income's collapse saw thousands of investors of all sizes across the UK without access to their investment for years, and ultimately nursing heavy losses.
The Financial Conduct Authority fined Mr Woodford £5,888,800 and banned him from holding senior manager roles and managing funds for retail investors.
His firm, Woodford Investment Management, has been fined £40million.
The FCA said Woodford made 'unreasonable and inappropriate investment decisions' and 'held a defective and unreasonably narrow understanding of his responsibilities' as a fund manager.
But Mr Woodford and WIM already plan to contest the regulator's verdict, which they have referred to the Upper Tribunal where they will present their case.
The FCA has previously secured a £230million redress scheme for investors stuck in Woodford Equity Income when it was suspended after setting out the failures of financial services firm Link in its role as the vehicle's 'authorised corporate director'.
But Tuesday marked the first time formal sanctions had been taken against Mr Woodford, who has more recently remerged as a 'finfluencer' with his own investment blog following the failure of WCM Partners in 2021.
Steve Smart, joint executive director of enforcement and market oversight at the FCA, said: 'Being a leader in financial services comes with responsibilities as well as profile.
'Mr Woodford simply doesn't accept he had any role in managing the liquidity of the fund. The very minimum investors should expect is those managing their money make sensible decisions and take their senior role seriously.
'Neither Neil Woodford nor Woodford Investment Management did so, putting at risk the money people had entrusted them with.'
What happened to WIM?
Woodford Investment Management imploded in 2019 after the Woodford Equity Income fund collapsed when investors rushed to the exit in droves amid a sustained period of underperformance.
The collapse of WEIF left some 300,000 investors stranded and left to wait five years to be compensated with a fraction of the capital they had entrusted with the fund manager.
Neil Woodford had a successful 25-year career when employed by Invesco, where his funds racked up billions of pounds of investment from retail investors and institutions alike on the back of bumper returns.
When he struck out on his own in 2014 investors naturally followed into the Woodford Patient Capital Trust, the Woodford Income Focus fund and – crucially – the WEIF.
WEIF's initial good run was followed by two years of poor performance, exacerbated by exposure to smaller – sometimes unprofitable – companies and unlisted stocks.
Eventually larger investors, such as the Kent County Council Pension Scheme, started pulling out large amounts of money.
Others followed suit and the fund's large exposure to illiquid assets meant it was unable to sell assets quick enough to meet outflows, leading to administrator Link forcing its suspension.
St. James's Place then terminated Woodford's contract to manage three of its funds.
The decision to close WEIF entirely in October 2019 left many investors out of pocket and ultimately led to the demise of Woodford Investment Management.
WEIF's assets fell from a high of over £10.1billion in May 2017 to just £3.6billion in the run-up to its suspension.
The FCA said Woodford had 'disproportionately sold more liquid investments' - those that are easier to sell - and bought less liquid ones between July 2018 and June 2019
This meant that at the time of suspension only 8 per cent of the fund's holdings could be sold within seven days, breaking City rules that require investors to be able to liquidate their investments within four days.
The FCA said: 'WIM and Mr Woodford did not react appropriately as the fund's value declined, its liquidity worsened and more investors withdrew their money.
'This disadvantaged investors who remained in the fund, compared to those who had withdrawn their investment before the fund was suspended.
It added that Mr Woodford 'held a defective and unreasonably narrow understanding of his responsibilities'.