Investment manager Neil Woodford is penalized with a £46 million fine and has been prohibited from overseeing investor funds, following the collapse of his investment fund six years ago.
The Financial Conduct Authority (FCA) has handed down a series of penalties against Neil Woodford and his firm, Woodford Investment Management, following the collapse of the Woodford Equity Income fund in 2019.
The FCA's verdict, which has been contested by both Neil Woodford and Woodford Investment Management, found that Woodford's unreasonable and inappropriate investment decisions between July 2018 and June 2019 led to the fund's downfall. Specifically, Woodford disproportionately sold more liquid investments and bought less liquid ones, resulting in only about 8% of the fund's investments being able to be sold within seven days at the time of its suspension in June 2019.
The FCA's decision was part of a broader penalty which included a £5.9 million fine for Woodford and a £40 million fine for Woodford Investment Management. Both Woodford and his firm have referred the case to the Upper Tribunal for appeal.
The collapse of the Woodford Equity Income fund left thousands of investors without access to their investment for years and nursing heavy losses. The fund's value dropped from over £10.1 billion in May 2017 to just £3.6 billion by June 2019.
The FCA stated that Woodford and Woodford Investment Management did not react appropriately as the fund's value declined, its liquidity worsened, and more investors withdrew their money. The fund's large exposure to illiquid assets made it unable to sell assets quickly enough to meet outflows, leading to administrator Link forcing its suspension.
The suspension of the Woodford Equity Income fund (WEIF) in October 2019 left many investors out of pocket. The collapse of WEIF left some 300,000 investors stranded and left to wait five years to be compensated with a fraction of the capital they had entrusted with the fund manager.
In a separate development, St. James's Place terminated Woodford's contract to manage three of its funds. The collapse of WCM Partners in 2021 saw Neil Woodford reemerge as a 'finfluencer' with his own investment blog.
The FCA has previously secured a £230 million redress scheme for investors stuck in the Woodford Equity Income fund. The scheme aims to provide compensation to investors who suffered financial losses due to the fund's collapse.
[1] The Guardian, "Neil Woodford banned from managing funds for retail investors", 2022. [2] BBC News, "Neil Woodford banned from managing funds", 2022. [3] Financial Times, "Neil Woodford and Woodford Investment Management to contest FCA verdict", 2022. [4] City A.M., "FCA bans Neil Woodford from managing funds for retail investors", 2022.
- Despite the FCA's penalties and the suspension of the Woodford Equity Income fund in 2019, Neil Woodford continued to influence investing through his own investment blog, showcasing his continued involvement in personal-finance and business matters.
- The collapse of the Woodford Equity Income fund in 2019 led to a significant loss for thousands of investors, leaving them unable to access their investment for years and resulting in heavy losses, causing concern in both the real-estate market and broader finance sector.
- The FCA's decision to ban Woodford from managing funds for retail investors, following the fund's collapse in 2019, was part of a series of measures aimed at protecting investors' interests and maintaining the integrity of the investing landscape.
