The Financial Conduct Authority has revealed it chose not to propose a fine of up to £50m for Link Fund Solutions’ handling of the Woodford Equity Income fund (WEIF).
Earlier today, the regulator published an 83 page final notice to Link, in which it detailed the failings of the firm in its role as authorised corporate director (ACD) of the fund.
The document states that the FCA would have proposed a £50m penalty on Link for its mishandling of its duties as ACD, but for the implementation of the scheme of arrangement. However, the regulator said Link had not agreed to the level of financial penalty, and could have contested the amount proposed.
The FCA added that imposing a financial penalty may have resulted in a reduction of the amount of restitution available to be paid to Woodford investors by Link.
The scheme of arrangement was approved earlier this year, while investors began to receive redress payments of up to £230m from Link at the end of March.
See also: Woodford investors to receive initial £185.7m distribution
On a media call following the announcement, Therese Chambers, FCA joint executive director of enforcement and market oversight, said: “A key objective in our enforcement work is around deterrence.
“And in order to achieve deterrence, we need firms to understand where serious failings have led to enforcement action, so that they can make the necessary changes in their own behaviour. This is all part of using enforcement to raise standards across the industry.”
Among the findings, the regulator said Link failed to act with “due skill, care and diligence in its management” of the Woodford Equity Income fund.
The FCA found that Link failed to properly manage the liquidity of the fund between 31 July 2018 and the fund’s suspension on 3 June 2019.
In a separate action announced this morning, the FCA has also proposed to take action against Woodford and his firm, Woodford Investment Management 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”.
Woodford and his firm’s legal counsel, WilmerHale and BCLP, challenged the findings, arguing the blame for liquidity mismanagement should be placed at Link’s door.
They confirmed that both Woodford and his firm would contest the allegations.
