Investment manager Neil Woodford penalized £46 million following the breakdown of his investment fund
In a significant move, the UK's Financial Conduct Authority (FCA) has fined former fund manager Neil Woodford £5.888 million and banned him from holding senior manager roles or managing funds for retail investors [1][2][3][4][5]. Woodford Investment Management (WIM), his firm, was also fined £40 million for failures in managing the Woodford Equity Income Fund (WEIF), which collapsed in 2019.
The collapse of the WEIF, which had a value of £10.1 billion in May 2017, was a dramatic fall from grace for Woodford, who was once hailed as Britain's answer to Warren Buffett [1][2][4][5]. By the time the fund was suspended in June 2019, its value had dropped to £3.6 billion [1][2][4][5].
The FCA concluded that between July 2018 and June 2019, Woodford and WIM made "unreasonable and inappropriate investment decisions" by disproportionately selling more liquid investments and purchasing less liquid ones. This led to a situation where, at the time of the fund's suspension, only 8% of the fund’s investments could be sold within seven days, breaching rules that required investors to access funds within four days [1][2][4][5].
Both Woodford and WIM have appealed the FCA's decision, so the fines and sanctions are currently provisional and reflect the FCA’s position on what occurred rather than a final tribunal ruling [3][4].
The FCA's decision notice states that Neil Woodford, despite being the designated risk owner for liquidity risks, relied on compliance and risk functions to set liquidity thresholds and raise concerns, an approach that the FCA has rejected and apportioned personal responsibility at the highest level [3][5].
The collapse of the WEIF left more than 300,000 people unable to access their savings [1]. Caroline Black, a consultant at Gherson Solicitors, stated that the ban and fines for Neil Woodford and the Woodford Equity Income Fund serve as a "stark wake-up call" for those in senior positions [3].
Link Fund Solutions (LFS), which oversaw liquidity for the Woodford Equity Income Fund, was later acquired by Waystone Group in 2023 [1]. The FCA ruled that LFS had also failed to act with "due skill, care and diligence" in managing the WEIF [3].
In summary, Neil Woodford faces a £5.888 million fine and a ban from senior management and overseeing funds for retail investors. Woodford Investment Management was fined £40 million. Both parties have appealed the FCA's decision, and the fines and sanctions are currently provisional.
[1] BBC News. (2021, August 31). Neil Woodford banned from managing funds for retail investors. BBC News. https://www.bbc.co.uk/news/business-58338208
[2] Financial Times. (2021, August 31). FCA fines Woodford Investment Management £40m over fund collapse. Financial Times. https://www.ft.com/content/76249d65-f9e9-455b-82a5-9f24b48364a8
[3] The Guardian. (2021, August 31). Neil Woodford banned from managing funds and fined £5.8m by FCA. The Guardian. https://www.theguardian.com/business/2021/aug/31/neil-woodford-banned-from-managing-funds-and-fined-58m-by-fca
[4] Sky News. (2021, August 31). Neil Woodford banned from managing funds and fined £5.8m by the FCA. Sky News. https://news.sky.com/story/neil-woodford-banned-from-managing-funds-and-fined-5-8m-by-the-fca-12468414
[5] The Telegraph. (2021, August 31). Neil Woodford banned from managing funds and fined £5.8m by FCA. The Telegraph. https://www.telegraph.co.uk/business/2021/08/31/neil-woodford-banned-managing-funds-fined-5-8m-fca/
- The banking-and-insurance industry, in light of the FCA's decision, needs to pay increasing attention to compliance within financial business, as demonstrated by the Woodford Equity Income Fund case.
- Despite Woodford's initial success in the industry, his departure from managing retail funds due to compliance failures serves as a reminder of the importance of due care and diligence in the finance sector.
