Woodford and his company face $61 mln fines over fund failure
The Financial Conduct Authority (FCA) proposed fining Woodford 5.9 million pounds and banning him from holding senior manager roles or managing funds for retail investors. His Woodford Investment Management (WIM) company will be fined 40 million pounds.
The Woodford Equity Investment Fund (WEIF), which was managed by Woodford and WIM, left more than 300,000 investors out of pocket when it was suspended in 2019, following outsized bets on illiquid assets that left it unable to meet redemption requests within a stipulated four-day period.
The FCA decision, which follows warning notices last year, has drawn fierce challenges from Woodford and WIM, who have referred the penalty notices to the Upper Tribunal, part of the High Court which deals with challenges to regulatory decisions.
The FCA accused Woodford and WIM of making "unreasonable and inappropriate" investment decisions between July 2018 and June 2019 by disproportionately selling liquid investments and not reacting appropriately as the fund's value declined, its liquidity worsened and redemption requests poured in.
"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," said Steve Smart, the FCA's joint head of enforcement and market oversight.
The regulator said Woodford had a responsibility to oversee the management of the fund's liquidity and failed to provide proper oversight of WIM's relationship with Link Fund Solutions (LFS), WEIF's authorised corporate director.
In a statement issued by law firm BCLP, WIM said the fund's liquidity was managed in accordance with LFS's framework, which had been "fully visible" to the FCA - and Woodford did not accept that his responsibilities extended to challenging and testing that.
Both Woodford and the company believed any loss suffered by investors was the product of bad decisions made by Link after the suspension, which were overseen by the FCA, WIM added. These included a "disorderly fire sale of assets by Link (LFS)".
"We believe that the appeal process will shed much-needed light on the events leading to and following the fund's suspension, including the regulator's role in those events, and we welcome the opportunity to set the record straight," it said.
The FCA has also criticised LFS for making "critical mistakes and errors" in how it oversaw WEIF's liquidity risk management and controls. A redress scheme worth 230 million pounds has been secured for those investors trapped in the fund when it was suspended.
($1 = 0.7531 pounds)
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