The Financial Conduct Authority bans former star fund manager from running retail funds or holding senior management roles in the City and imposes a £40m fine on his former business Woodford Investment Management.
The £5.9m penalty for Woodford and a £40m fine for his former business Woodford Investment Management (WIM) comes six years after the suspension of the Woodford Equity Income (WEIF) fund left thousands of investors unable to access their money.
Last year the City regulator warned Woodford and WIM that it was planning to take enforcement action and did not regard the UK’s best known professional investor as a “fit and proper” person.
Both Woodford and WIM have referred the FCA’s decision to the regulator’s Upper Tribunal for appeal with the regulator noting that its findings were therefore provisional.
The FCA said it had concluded that Woodford and WIM had made “unreasonable and inappropriate investment decisions” between July 2018 and June 2019 when a growing number of investors withdrew their money alarmed by its poor performance. This followed Woodford’s decision to refocus the two-year-old fund after the 2016 Brexit vote, moving away from large blue-chip global companies to smaller UK companies, particularly in the life science and technology sectors.
The watchdog said the fund manager and WIM did not react appropriately as the fund’s value plunged from £10.1bn in May 2017 to £3.6bn and its liquidity worsened as more investors redeemed their holdings.
Its analysis showed the manager, who held most of the senior roles within his business, did not adopt a balanced approach to trading, selling a much greater amount of liquid assets than he bought and bought a greater amount of illiquid assets than he sold.
Moreover, between January 2018 and February 2019 Woodford had sidestepped limits on unquoted holdings when some of his companies listed on the International Stock Exchange in Guernsey, a move that did not change their classification as among the most illiquid, or hard to sell, positions in WEIF.
At the time of its suspension, only 8% of the fund’s investments could be sold in seven days, despite a requirement that investors could access their money in four days. This disadvantaged investors who remained in the fund.
The FCA said Woodford held a “defective and unreasonably narrow understanding of his responsibilities” and did not accept he had a responsibility to oversee the fund’s liquidity.
Steve Smart, joint executive director of enforcement and market oversight at the FCA, said. “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 entrusted them with.”
In 2024 the FCA ordered Link Fund Solutions, the fund’s authorised corporate director, to set up a £230m redress scheme for Woodford’s remaining investors, although it refrained from imposing a £50m fine that it said would only have decreased the payout to investors.
The liquidity crisis at WEIF also damaged the Woodford Patient Capital Trust which he launched in 2015 with a then record £800m fund raising to focus on UK startups. Woodford resigned as fund manager as its share price slumped with the board appointing Schroders to revive the portfolio. The company was subsequently renamed Schroders Capital Global Innovation (INOV). This year shareholders voted to wind it down and retrieve their money after performance failed to improve.
Since the collapse of his business, Woodford has reestablished himself with a new business, W4.0, where investors can subscribe to the investment opinions of the former Invesco equity income fund manager without giving him their money.
