The Financial Conduct Authority (FCA) has issued a £46m fine against once-renowned investment manager Neil Woodford and his former firm, Woodford Investment Manager (WIM).
The City watchdog handed Woodford a fine of £5.88m and banned him from holding senior manager roles and managing funds for retail investors.
The authority also fined Woodford Investment Management £40m.
Both are challenging the decision in the Upper Tribunal.
Woodford’s “inappropriate investment decisions”
Woodford Equity Income Fund (WEIF) was an investment fund managed by Woodford and WIM, with both responsible for managing the liquidity of the fund.
The fund was suspended in June 2019, leaving investors unable to access their money and trapping around £3.7bn in assets, in one of the most dramatic collapses in recent years.
The fund valuation had fallen from a high of over £10.1bn in May 2017 to just £3.7bn in the run-up to its suspension.
The FCA concluded that between July 2018 and June 2019, both parties “made unreasonable and inappropriate investment decisions”, disproportionately selling more liquid investments and buying less liquid ones.
By the time of the suspension, only eight per cent of investments held by WEIF could be sold within seven days.
This broke rules in place at the time, which stated investors should be able to access their funds in seven days.
WIM and Woodford did not react appropriately as the fund’s value declined, according to FCA findings, as its liquidity worsened and more investors withdrew their money, leaving those who remained in the fund at a disadvantage.
Did not accept responsibility
The FCA concluded that Woodford held a “defective and unreasonably narrow understanding of his responsibilities” despite his senior role.
He did not accept any responsibility for the fund’s suspension in interviews conducted by the FCA and failed to provide oversight of WIM’s relationship with the fund administrator Link Fund Solutions, including after Link raised the alarm about the fund’s liquidity.
Steve Smart, joint executive director of enforcement and market oversight at the FCA, said: “Mr Woodford simply doesn’t accept he had any role in managing the liquidity of the fund.”
“The very minimum investors should expect is those managing their money make sensible decisions and take their senior role seriously.”
“Neither Neil Woodford nor Woodford Investment Management did so, putting at risk the money people had entrusted them with.”
In an interview with City AM, Woodford denied misleading investors, insisting he “could not have been more transparent” to his retail shareholders.
He said: “We could not have been more transparent about the strategy, what we were doing, how the fund was made up.”