Neil Woodford and his firm fined £46m over fund's collapse

Times

a day ago

The fallen fund manager Neil Woodford and his defunct firm have been fined £46 million for their role in the collapse of their high-profile fund, and he was banned from any senior City role including managing money for retail investors.
The Financial Conduct Authority said Woodford, whose asset management empire collapsed in 2019 after its principal Woodford Equity Income Fund was capsized by a wave of redemption requests, was not fit and proper to run retail funds or hold any senior City role.
Woodford, 65, is facing a £5.9 million fine while Woodford Investment Management, of which he is the majority shareholder, is being hit with a £40 million penalty.
Woodford's personal penalty was doubled on the grounds that a smaller sum would not have had been a sufficient deterrent to prevent other fund managers making the same choices, the FCA said.
The size of the fine was also determined by Woodford's 'extremely prominent profile' in the investment industry and because of the damage he had inflicted on confidence in the wider retail fund management sector.
The judgments remain 'provisional' as Woodford, who has repeatedly denied any wrongdoing, is challenging them in the Upper Tribunal.
Responding to the watchdog's decision notice, he said he strongly disagreed with it and suggested he would expose the FCA's own regulatory failings in the affair. The tribunal case, he said, would 'shed much-needed light on the events leading to and following the fund's suspension, including the regulator's role in those events'.
Hundreds of thousands of investors were left out of pocket when the Woodford Equity Income Fund was suspended in 2019 and later put into liquidation. They have got back £1 billion less than the value of their holdings on the day the £3.6 billion fund was suspended.
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Woodford's reputation sank from a lionised stockpicking genius to negligent incompetent in the space of a few months.
At the heart of the matter was Woodford's refusal to accept any responsibility for managing the liquidity of the Woodford Equity Income Fund so it was able to withstand redemption requests without resorting to a fire sale of assets, the FCA said.
At his zenith, Woodford attracted more than £15 billion of institutional and investor money when he defected from Invesco Perpetual with a superlative track record to set up his own firm WIM in 2014.
In the four years before the collapse he and his co-founder Craig Newman extracted £98 million in dividends from WIM. Woodford used the money to indulge his passion for Ferraris and Porsches, a stable of horses, a 423-hectare Cotswold farm and a £6.35 million Devon holiday home.
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The FCA concluded that between July 2018 and June 2019 WIM and Woodford made 'unreasonable and inappropriate investment decisions' and 'disproportionately sold more liquid investments [those that are easier to sell] and bought less liquid ones over this period'.
Steve Smart, joint enforcement director 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.'
The honours forfeiture committee in the Cabinet Office has come under fresh pressure to remove the CBE awarded to Woodford in 2013 for services to the UK economy. A campaign group including MPs and financial think tanks renewed its call for the honour to be revoked because of the 'terrible harm' he caused.
Woodford has argued that the bulk of investor losses were down to the decision to liquidate the Woodford Equity Income Fund rather than reopen it after the suspension pause.
The FCA accepted that Woodford's conduct did not amount to a lack of integrity, but was merely negligent.