The United Kingdom’s Financial Behavior Authority (FCA) has decided to improve both Neil Woodford and Woodford Investment Management (WIM) for failures in the management of the Equity Woodford Income Fund (WEIFord).
FCA imposed a fine of £ 5,888,800 on Mr Woodford and forbade him from holding the director’s superior roles and managing capital for retail investors.
The regulatory authority also decided to clear Wim £ 40,000,000.
Weif was an investment fund managed by Mr Woodford and Wim. They were responsible for managing the liquidity of the Fund so that investors could redeem their investment and repay.
The fund was postponed in June 2019, leaving investors – an important majority of which were used to retail customers – they could not access their money. The value of Weif had fallen from a high height of more than £ 10.1 billion in May 2017 to just £ 3.6bn while preparing its suspension.
The FCA concluded that since July 2018 and June 2019 Wim and Mr Woodford made irrational and inappropriate investment decisions. They made it disproportionately more fluid lining (the one that is easier to sell) and bought less liquids during this period. This meant that at the time of suspension only 8% of the investments held by Weif could be sold within 7 days. According to the rules in force at that time, investors should have access to their funds within 4 days.
Wim and Mr Woodford did not react properly as the value of the fund declined, its liquidity deteriorated and more investors withdrew their money. These disadvantaged investors who remained in the fund, compared to those who had withdrawn from their investment before the fund was suspended.
The FCA concluded that Mr Woodford had a defective and unjustified close understanding of his responsibilities. Despite his superior role, he did not accept that he was responsible for overseeing the management of the Fund’s liquidity, including interviews by FCA. It also failed to provide the proper supervision of WIM’s relationship with Link Fund (link) solutions, WEIF’s authorized corporate director, among other things, after linking, raised concerns about the cashier’s liquidity.
FCA believes that the failures of Mr Woodford and Wim have led to a significantly increased risk of suspending the fund.
FCA previously set its findings against the Association for its role in suspending Weif. This included securing a £ 230 million compensation system for investors who have been stuck in the fund when suspended.