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FCA confirms Woodford investigation after year-long concerns

Neil Woodford

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.

MPs quiz Hargreaves on Woodford links

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.”

Hargreaves boss could pass up bonus after Woodford fallout

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.

Chris Gilchrist: Woodford’s management now under the microscope

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.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. I this true? Year long concerns before the Regulator gets off its backside and actually does something? If so – incredible!

  2. I am guessing that the fall guys for this will be the advisers.

  3. As with Equitable Life there has probably been a lot of denial in high places, until the facts are unavoidable.

    In the end the outcome may be more favourable than expected, but we are all governed by sets of rules which protect consumers from financial loss and any breaches should be investigated at the first opportunity.

  4. Julian Stevens 19th June 2019 at 8:57 am

    If, following the FCA’s intervention, the two breaches [of the maximum proportion of unlisted securities held within the fund] “were resolved within the agreed time-frame”, why did the fund’s liquidity position continue to deteriorate month by month after April 2018? On one hand Mr Bailey has claimed that the action the FCA took sorted out the problem but it seems that it did no such thing. The fund’s course towards having to be suspended seems to have continued unchecked.

    Just what is the basis of Mr Bailey’s statement that he “cannot comment any further”? In Ms. Morgan’s position, I’d tell him in no uncertain terms that the Committee requires his further comments, now and in full, without further obfuscation.

  5. All to often, too little too late …

    The FCA, seems to have a recurring theme …

    I would like to hear a valid excuse, understaffed and underfunded are obviously null and void ….

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