FCA asks if Hargreaves acted fast enough on Woodford

Andrew Bailey BBA Conference 2012 480The FCA chief executive Andrew Bailey has said the regulator will look at how quickly the Hargreaves Lansdown platform acted to remove the suspended Woodford Equity Income Fund.

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.

During his hearing in front of the Treasury Committee Bailey was asked whether clients of Hargreaves Lansdown were given the right information.

The fund appeared on the platform’s Wealth 50 list right before its suspension. Hargreaves had been a bullish supporter of Woodford, even as others criticised his performance and methodology.

Bailey said: “Hargreaves are not supposed to give advice in the technical regulatory sense, but they do have funds in the Wealth 50 list.” Bailey went on to say that they previously supervised Hargreaves over how the list is governed and controlled and will do so again in the light of its dealing with Woodford.

Bailey continued: “Just to be clear, we are now going back to the question on how Hargreaves controlled this table with the particular question of were they too slow to take the fund off the table? Were they right to leave it on for that long, particularly for the last two to three months?”

The FCA chief was also challenged on the availability and nature of information on the fund: “It seems that a lot of people were hitting the exit door, while people with less information, less knowledge were left alone in the fund. How do we deal with the information disparity?”

FCA confirms Woodford investigation after year-long concerns

Bailey said: “One of the paradoxes, that a lot of the commentators pointed out about Woodford, is that he is more transparent than actually quite a lot of the industry in terms of what the holdings of the fund were.

“I am not a representative consumer, I accept that, but I did do a trial and I went to the Morningstar website off of a Google search and it got me the contents of the fund and it took under a minute to get it.”

He added: “Maybe I am quicker than most, but it is not difficult to find out what is in Woodford fund.”

Investors weigh up next steps after Woodford 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.

Open-ended mutual funds are allowed to hold maximum 10 per cent of their holdings in unquoted stocks. Bailey today revealed that Woodford’s fund had 10.3 per cent of these stocks in February, but managed to lower the exposure to unlisted stocks within a month. However the next month the fund’s holdings went over 10 per cent again. After this, the fund was put on enhanced liquidity monitoring.

Bailey said there were 3,000 funds in this universe under the FCA’s supervision, two of which, Woodford’s equity fund and one other, breached the limit.

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. FCA asking how quickly someone acted?
    Full marks for brass neck.

  2. take the high road 25th June 2019 at 4:06 pm

    Bailey said: “Hargreaves are not supposed to give advice in the technical regulatory sense, but they do have funds in the Wealth 50 list”….so, my point is this, if there is a RECOMMENDED list of any description then technically this should be covered by regulatory scrutiny by the FCA, in the same way as any other recommendations which are given by Financial Advisers….or, perhaps Mr Bailey would like to enlighten us as to why this is not the case?

  3. Has the FCA investigated why the FCA didn’t act more swiftly? Apparently there were only two instances of this type of liquidity problem. So not exactly stacked out then!

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