FCA fines Neil Woodford and his firm £46m for mismanagement of Woodford Equity Income fund.

The FCA has fined Neil Woodford and his firm £46m for their role in the liquidity crisis that engulfed his Woodford Equity Income fund in 2019. The regulator found that Woodford's investment decisions contributed to the fund's deteriorating liquidity, despite his claims that he was right about his strategy. Woodford's defiance and reluctance to make portfolio changes are highlighted in the FCA's 120-page findings.

The Financial Conduct Authority (FCA) has provisionally fined former fund manager Neil Woodford and his firm Woodford Investment Management (WIM) a combined total of £46 million for their role in the liquidity crisis that engulfed the Woodford Equity Income Fund (WEIF) in 2019. The regulator found that Woodford's investment decisions contributed to the fund's deteriorating liquidity, despite his claims that he was right about his strategy. Woodford's defiance and reluctance to make portfolio changes are highlighted in the FCA's 120-page findings.

The FCA imposed a £5.89 million fine on Neil Woodford and a £40 million fine on WIM. Woodford has been banned from holding senior manager roles and managing funds for retail investors. Both parties have referred the case to the Upper Tribunal to present their case for appeal, making the sanctions provisional [1].

The FCA concluded that between July 2018 and June 2019, Woodford and WIM made "unreasonable and inappropriate investment decisions" by selling off liquid investments and acquiring illiquid ones. This hindered investors' ability to redeem their funds, leading to the fund's suspension in June 2019 [2]. At its peak in May 2017, the WEIF managed more than £10.1 billion, but this had dropped to £3.6 billion before its suspension, leaving thousands of retail investors unable to access their savings [3].

The regulator found that Woodford demonstrated a "defective and unreasonably narrow" understanding of his responsibilities, including a failure to oversee the fund's liquidity management and to properly monitor the role of Link Fund Solutions, WEIF's authorized corporate director. Woodford denied having responsibility even during FCA interviews [2].

Steve Smart, joint executive director of enforcement and market oversight at the FCA, said, "Being a leader in financial services comes with responsibilities as well as profile. Mr. Woodford simply doesn't accept he had any role in managing the liquidity of the fund. The very minimum investors should expect is those managing their money make sensible decisions and take their senior role seriously. Neither Neil Woodford nor Woodford Investment Management did so, putting at risk the money people had entrusted them with" [2].

Campaign groups have called for Woodford to forfeit his CBE (Commander of the Order of the British Empire) honour as a result of the scandal [1].

References:
[1] https://www.rhyljournal.co.uk/news/national/25365861.former-fund-manager-neil-woodford-banned-fined-almost-46m/
[2] https://www.moneymarketing.co.uk/news/fca-hits-neil-woodford-and-former-firm-with-46m-in-fines/
[3] https://www.bbc.co.uk/news/articles/ckgdx0lgg28o