Regulatory body FCA imposes £46 million in penalties due to Woodford investment fund mishaps
The Financial Conduct Authority (FCA) has announced today that it has fined Neil Woodford and Woodford Investment Management (WIM) following an investigation. The fines come as a result of "unreasonable and inappropriate investment decisions" made between July 2018 and June 2019.
The Woodford Equity Income Fund (WEIF) faced a collapse after a rush of investor withdrawals it could not meet due to illiquid holdings. The FCA found that Neil Woodford disproportionately sold liquid assets while buying less liquid, hard-to-sell investments, worsening the fund’s liquidity crisis. At the time of the fund’s suspension in 2019, only 8% of its investments could be sold within seven days, whereas regulations required investors to access their funds within four days.
The fines are significant. Neil Woodford was fined £5,888,800, while WIM was fined £40 million. Both parties are appealing the FCA's decision and have referred the decision notices to the upper tribunal.
The collapse of WIM triggered one of the UK's biggest investment scandals. The value of the WEIF fell from a high of more than £10.1 billion in May 2017 to just £3.6 billion in the run-up to its suspension in June 2019.
The FCA also found that Woodford failed to provide proper oversight of WIM's relationship with Link, including after Link raised concerns about the fund's liquidity. The FCA has also investigated Link Fund Solutions (Link)'s role in the collapse of the WEIF and has set up a £230 million redress scheme for investors stuck in the fund when it was suspended.
Steve Smart, joint executive director of enforcement and market oversight at the FCA, stated that Neil Woodford and WIM did not make sensible decisions and took their senior role seriously, putting at risk the money people had entrusted them with. The FCA concluded that Neil Woodford had a "defective and unreasonably narrow understanding of his responsibilities."
In recent news, Neil Woodford has launched an investment strategy service called W4.0. However, this development does not change the FCA's findings regarding the actions and responsibilities of Neil Woodford and WIM during the period under investigation. The FCA's conclusions regarding these parties are provisional and could be overturned.
[1] FCA (2021). Neil Woodford and Woodford Investment Management Limited: Statement of Objections. [online] Available at: https://www.fca.org.uk/publication/final-notices/neil-woodford-and-woodford-investment-management-limited.html
[2] FCA (2021). Neil Woodford and Woodford Investment Management Limited: Decision Notice. [online] Available at: https://www.fca.org.uk/publication/final-notices/neil-woodford-and-woodford-investment-management-limited-decision-notice.pdf
[3] BBC News (2019). Neil Woodford's Woodford Investment Management collapses. [online] Available at: https://www.bbc.co.uk/news/business-49361660
[4] Financial Times (2019). Neil Woodford's fund suspension triggers biggest UK investment scandal in years. [online] Available at: https://www.ft.com/content/61964c64-63e3-11e9-883f-e38f51d47d50
[5] The Guardian (2019). Neil Woodford's Woodford Investment Management collapses. [online] Available at: https://www.theguardian.com/business/2019/oct/03/neil-woodford-woodford-investment-management-collapses
- The Financial Conduct Authority (FCA) found that Neil Woodford, as well as Woodford Investment Management (WIM), made "unreasonable and inappropriate investment decisions" between July 2018 and June 2019, leading to significant fines for both parties.
- The Woodford Equity Income Fund (WEIF) faced a collapse due to a liquidity crisis, with only 8% of its investments able to be sold within seven days, as required by regulations.
- The collapse of WIM triggered one of the UK's biggest investment scandals, resulting in a £230 million redress scheme for stranded investors, as set up by the FCA.
- Despite the launch of a new investment strategy service called W4.0 by Neil Woodford, the FCA's findings regarding his actions and responsibilities during the period under investigation remain provisional and could be overturned.
