Regulatory Authority Levies Penalty on Ex-Fund Manager Neil Woodford
Neil Woodford, once a celebrated figure in the investment sector, has found himself in hot water with the Financial Conduct Authority (FCA) after a series of missteps that led to the collapse of his Woodford Equity Income Fund (WEIF) in 2019.
The FCA has imposed a fine of nearly £46 million on Woodford and his investment firm, Woodford Investment Management (WIM), due to their failures in managing the WEIF during a critical period from July 2018 to June 2019. The fine is a result of poor liquidity management, imprudent investment decisions, failure to safeguard investor access to their funds, and inadequate oversight.
The specific reasons for the fine include making unreasonable and inappropriate investment decisions by disproportionately selling more liquid assets while acquiring illiquid assets. This shift increased the fund’s illiquidity considerably and harmed investors' ability to redeem their investments. By the time of the fund's suspension in June 2019, only 8% of the fund’s holdings could be sold within 7 days, far below the regulatory requirement that investors should be able to access their money within 4 days.
Steve Smart, the FCA's executive director of enforcement, expressed concerns about Woodford's management practices. He emphasized that the minimum investors should expect is for those managing their money to make sensible decisions and take their senior role seriously.
The FCA also proposed to ban Neil Woodford from managing retail investment funds and holding senior management roles in the financial services industry. Both Woodford and WIM are appealing the provisional regulatory decisions to the Upper Tribunal.
The WEIF, which had £10 billion in assets at its peak, plummeted to about £3.6 billion by mid-2019, leading to a surge in redemption requests and the eventual suspension and liquidation of the fund. Approximately 300,000 investors faced losses when the fund collapsed.
Smart stated that both Woodford and his firm failed to uphold the trust of their investors. The penalties issued to Neil Woodford and his firm are not yet finalized as they have appealed the provisional findings.
Mr. Woodford gained prominence at Invesco Perpetual before launching his own venture. The collapse of the WEIF has tarnished his reputation as a preeminent figure in the investment sector.
The finance sector is grappling with the consequences of Neil Woodford's missteps, especially his failing to manage the liquidity of the Woodford Equity Income Fund (WEIF) during a critical period from July 2018 to June 2019, leading to imprudent investment decisions, inadequate oversight, and the collapse of the fund. This incident underscores the importance of personal-finance management and wealth-management practices in the business world, stressing that those managing money should make sensible decisions and take their senior role seriously.
