Fallen investor Woodford hit with official warning by watchdog

West Country based Neil Woodford has been hit with a warning notice by the Financial Conduct Authority over the spectacular collapse of his fund five years ago.

The watchdog accused the Dorset based Woodford of having a “defective understanding” of liquidity risks faced by his fund.

The FCA added that it intends to take action against Woodford and Woodford Investment Management (WIM) in respect of their conduct in the management of the Woodford Equity Income Fund (WEIF) before its suspension in 2019.

The FCA said Woodford held “a defective and unreasonably narrow understanding of his responsibilities for managing the WEIF’s liquidity risks”.

It added that he also failed to ensure the his company had appropriate liquidity when making investment decisions

Woodford was forced close the fund almost five years ago with almost 300,000 investors left counting the cost.

Bristol stock broker Hargreaves Lansdown is also facing legal action after promoting the fund to its cutsomers.

The fund was launched by Woodford in 2014 after a successful career working as a fund manager at Invesco.

After initial success a number of unsuccessful investments resulted in many investors withdrawing cash, prompting a liquidity crisis.

In the notice, the FCA said the investment decisions made by Woodford and WIM materially increased the risk of and resulted in the WEIF’s liquidity profile “becoming unreasonable and inappropriate”.

It added: “They also materially increased the risk that the WEIF would need to be suspended and thereby place those investors who did not redeem prior to the point of suspension at a disadvantage.”

Woodford and WIM’s legal team issued a statement.

It said: “The FCA alleges that WIM and Mr Woodford failed to act with due skill, care and diligence during the 11 months from 31 July 2018 to 3 June 2019, when Link decided to suspend the fund.

“It is striking that the FCA’s only criticisms of Neil Woodford relate to his involvement in matters relating to the Fund’s liquidity framework, which was, in fact, Link’s responsibility and supervised by the depositary.”