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Neil Woodford, a former star fund manager, along with his investment firm, has been hit with a hefty fine of nearly £46m by the financial watchdog. The collapse of the Woodford Equity Income Fund in 2019 led to losses for around 300,000 individuals, as they attempted to withdraw money at a pace faster than the fund could handle. The Financial Conduct Authority (FCA) has imposed a provisional fine of almost £6m on Mr. Woodford and prohibited him from holding senior managerial positions or managing funds for non-professional investors. Additionally, Woodford Investment Management (WIM) has been fined £40m by the regulatory body.
Mr. Woodford, once celebrated as a high-flying city fund manager, gained fame during his time at Invesco Perpetual before departing in 2013 to establish his own firm. Considered by some as the individual who helped middle England prosper and likened to the UK’s version of Warren Buffet, he attracted numerous investors to his flagship UK Equity Income Fund at its peak, amassing £10bn in assets. However, the Woodford Equity Income Fund, managed by Mr. Woodford and WIM, was suspended in June 2019, preventing retail investors, who made up the majority of the fund’s stakeholders, from accessing their funds.
The FCA’s assessment pointed out that between July 2018 and June 2019, WIM and Mr. Woodford were responsible for “unreasonable and inappropriate investment decisions.” Assets that were challenging to liquidate were purchased while more easily sellable investments were offloaded, leading to a liquidity crisis. Consequently, just 8% of the fund’s investments could be converted into cash within seven days at the time of suspension, as opposed to the industry standard of four days. The watchdog criticized the lack of appropriate action by WIM and Mr. Woodford as the fund’s value diminished, liquidity deteriorated, and more investors sought to withdraw their funds.
Steve Smart, the joint executive director of enforcement and market oversight at the FCA, highlighted the responsibilities that come with being a leader in the financial services sector, indicating that Mr. Woodford failed to acknowledge his role in managing the fund’s liquidity. Investors, he contended, should be able to trust that their money is being handled responsibly by those in charge, a duty that both Neil Woodford and Woodford Investment Management neglected, endangering the funds entrusted to them
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