A high-profile fund manager and his firm are being fined a combined £46 million by the U.K.’s Financial Conduct Authority (FCA) for allegedly breaching their responsibilities to investors when a flagship fund ran into liquidity issues.
The FCA provisionally imposed a £40-million fine on fund firm Woodford Investment Management and a £5.9-million penalty on Neil Woodford for alleged failures in managing the Woodford Equity Income Fund, which was suspended in 2019 amid a surge in redemptions after the fund’s value dropped from £10.1 billion in 2017 to £3.6 billion. After being suspended, the fund was ultimately put into liquidation.
According to decision notices from the FCA, the regulator concluded the fund managers “made unreasonable and inappropriate investment decisions” between July 2018 and June 2019, when the fund was suspended. Specifically, it found they sold illiquid assets and acquired illiquid assets during this period, hindering investors’ ability to redeem their funds.
Both Woodford and the firm are appealing the regulator’s ruling to the Upper Tribunal in the U.K., so the decisions are considered “provisional,” the FCA said.
In addition to the monetary sanctions, the FCA is also proposing to ban Woodford from managing funds for retail investors and from holding senior manager positions in the financial industry.
“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,” said Steve Smart, joint executive director of enforcement and market oversight at the FCA, in a release.
“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,” he added.
Last year, the FCA also settled a case against Link Fund Solutions — the fund’s authorized corporate director — for its oversight failures. As part of that deal, the firm agreed to pay up to £230 million in redress to harmed investors.