UK FCA Fines Woodford £46 Million
The UK Financial Conduct Authority (FCA) has penalized Neil Woodford and his investment company, Woodford Investment Management (WIM), £46 million for severe mismanagement of the collapse of the Woodford Equity Income Fund (WEIF). The fines, including a £5.9 million individual fine for Woodford and a £40 million fine for WIM, are some of the largest in UK retail investment history.
The FCA probe revealed that during July 2018 to June 2019, Woodford made “unreasonable and inappropriate” choices that exposed investors to liquidity risk. The fund invested more and more in illiquid and not-listed assets while liquidating more liquid holdings. Consequently, when investors attempted to redeem, the WEIF could not fulfill redemption requests and, subsequently, was suspended in June 2019. Only 8% of the fund’s assets at the time were capable of being sold within seven days—well short of FCA standards.
The regulator reprimanded Woodford for not managing liquidity risks and for having a too-narrow view of his duties. The firm’s management of its relationship with administrator Link Fund Solutions was also found lacking. The FCA’s conclusions impacted more than 300,000 investors who lost substantial amounts of money.
Both WIM and Woodford have appealed the FCA ruling to the Upper Tribunal, rendering the fines provisional at present. Woodford has objected, asserting that the FCA had never before complained about the liquidity of the fund.
