The Financial Conduct Authority has issued warning notices to Neil Woodford (pictured) and Woodford Investment Management over their handling of liquidity in the Woodford Equity Income Fund (WEIF), while it has also found Link Fund Solutions (LFS) failed to act with due skill, care and diligence in its management of the fund.
According to the regulator’s findings, LFS failed to properly manage the liquidity of the fund between 31 July 2018 and the fund’s suspension on 3 June 2019.
LFS was appointed as the fund’s Authorised Corporate Director (ACD) at its inception in May 2014.
The FCA said LFS also failed to ‘properly oversee’ Woodford Investment Management (WIM) or to sufficiently ensure that concerns about liquidity were acted on.
Therese Chambers, joint executive director of enforcement and market oversight, said: “Link Fund Solutions’ job was to properly manage the Woodford Equity Income Fund and to protect investors’ interests. Their failings led to losses for those trapped in the fund when it was suspended.
“It is right that they compensate investors for the losses that resulted from their failings, and we’re pleased that the scheme has started making payments.”
Investors began to receive redress payments from Link at the end of March.
See also: Woodford investors to receive initial £185.7m distribution
In a separate action, the FCA has also proposed to take action against Woodford and his firm for their conduct in the management of the WEIF.
Among the allegations against Woodford, the FCA allege he had a “defective and unreasonably narrow understanding of his responsibilities for managing liquidity risks”.
The regulator also argues that he and WIM failed to ensure that the WEIF’s liquidity risk framework was appropriate, to respond appropriately to the ongoing deterioration in the fund’s liquidity, and to maintain a reasonable liquidity profile for the WEIF.
Woodford to challenge findings
Both Woodford and WIM have the right to make representations to the Regulatory Decisions Committee before the actions are finalised.
WilmerHale and BCLP, legal counsel to WIM and Neil Woodford, have responded to the allegations, stating both Woodford and WIM disagree with the FCA’s findings, which they believe are “unprecedented” and “fundamentally misconceived”.
They said: “It is striking that the FCA’s only criticisms of Neil Woodford relate to his involvement in matters relating to the fund’s liquidity framework, which was, in fact, Link’s responsibility and supervised by the Depositary – the Depositary is responsible for the safekeeping of the Fund’s assets and for overseeing the fund’s Authorised Corporate Director – and the FCA.”
They added that they intend to challenge the findings.
