Link Fund Solutions (LFS) failed to act with due skill, care and diligence in the management of Woodford Equity Income Fund (WEIF), according to findings published today by the UK Financial Conduct Authority (FCA).
The FCA found that between 31 July 2018 and the suspension of the fund on 3 June 2019, LFS failed to manage the fund’s liquidity – or how easily the fund’s assets could be turned into cash – so that investors could access their money in a short period of time.
LFS also failed to properly supervise Woodford Investment Management (WIM) nor to adequately ensure that liquidity concerns were addressed. In a separate action, the FCA has issued warning notices to Neil Woodford and WIM recommending that action be taken against them for their conduct in the management of WEIF.
The FCA published a warning statement about its proposed action against Mr Woodford and WIM. This includes the FCA’s allegations that Mr Woodford had a flawed and unduly narrow understanding of his liquidity risk management responsibilities. He also alleges that he and WIM failed to ensure that WEIF’s liquidity risk framework was appropriate, to respond appropriately to the continued deterioration of the fund’s liquidity and to maintain a reasonable liquidity profile for WEIF.
The warning notices given to Mr Woodford and WIM are not the final decisions of the FCA and both parties have the right to make representations to the Regulatory Decisions Committee. Should the FCA make final decisions, it intends to make its findings public at the appropriate point, but cannot provide any further details beyond the warning statement at this stage, including any proposed sanctions.
The LFS final notice confirms the failings that led to the FCA’s investigation and the subsequent agreement by LFS to settle the enforcement case and provide compensation to those affected. Those invested in WEIF when it was suspended are starting to receive a share of the up to £230m redress scheme approved by the High Court in February.
The FCA has also confirmed that there are no other parties under investigation in relation to the Woodford Equity Income Fund.