Responding to concerns over the suspended Woodford fund, the FCA has said it first contacted the fund’s legal owner about risks in February 2018, and is now investigating events that led to the suspension.
In a letter to Treasury Select Committee chair Nicky Morgan, the FCA’s chief executive Andrew Bailey said the regulator was first in touch with the management of Woodford Equity Income Fund last year, regarding the fund’s regulatory breaches.
The letter was a response to Morgan’s query from June 10, 2019 where she asked the FCA to provide a timeline of the FCA’s supervisory contact with the fund.
Today, Bailey said the FCA engaged with Link Fund Solution – which acted as the the fund’s authorised corporate director and its legal owner – in February 2018 and then again in March 2018, regarding the WEIF’s two breaches of 10 per cent limit on the maximum proportion of unlisted securities held within WEIF.
The FCA said following its engagement, the breaches were resolved within the agreed time-frame. Following this, the FCA then continued to monitor deteriorating liquidity position of the fund monthly since April 2018 to December 2018.
In the letter, Bailey confirms to Morgan the FCA has opened an investigation into events leading to the suspension of Woodford Equity Income Fund but that he “cannot comment any further.”
The flagship fund was suspended on 3 June after the fund came under scrutiny by industry experts due to rapid outflows and underperformance in recent months.
In an announcement the fund said it is “in the best interest of all investors in the fund” to suspend issue, cancellation, sale, redemption and transfer of shares in the fund.
The idea behind the decision was to allow Woodford time to reposition the element of the fund’s portfolio invested in unquoted and illiquid stocks in to more liquid investments.
Since the announcement, Hargreaves Lansdown has removed the fund and the Woodford Income Focus fund from its Wealth 50 list.
Advice giant St James’s Place terminated a £3.5bn management agreement with Woodford, passing the mandate to Columbia Threadneedle and RWC Partners.
MP and Treasury committee chair Nicky Morgan had asked the FCA for information about how it had managed the issue and whether Woodford Investment Management should stop charging a management fee while the fund is suspended.