The latest compliance news: regulatory developments, punishments, guidance, permissions and new product and service offerings.

The UK regulator, Financial Conduct Authority, has issued fines of almost £46 million ($61.8 million) on Neil Woodford, and his eponymous firm, Woodford Investment Management. The fines are for failures in their management of the Woodford Equity Income Fund.

Woodford and the firm have referred the regulator’s decision notices to the Upper Tribunal where each will present their case. The FCA said in a statement earlier this week that any findings in the notices are “therefore provisional and reflect the FCA’s belief as to what occurred and how it considers their behaviour should be characterised.”

The FCA fined Woodford £5.889 million and banned him from holding senior manager roles and managing funds for retail investors. It also fined WIM £40 million.

"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,” Steve Smart, joint executive director of enforcement and market oversight at the FCA, said. “The very minimum investors should expect is [that] 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."

WEIF was an investment fund managed by Woodford and WIM. They were responsible for managing the liquidity of the fund, so that investors could redeem their investments and be repaid.

The fund was suspended in June 2019, leaving investors – a significant majority of whom were ordinary retail customers – unable to access their money, the FCA said. The value of the WEIF had collapsed from a high of more than £10.1 billion in May 2017 to £3.6 billion in the run-up to its suspension.

The FCA said it concluded that between July 2018 and June 2019 WIM and Mr Woodford made “unreasonable and inappropriate investment decisions.”

“They disproportionately sold more liquid investments (those that are easier to sell) and bought less liquid ones over this period. This meant that at the time of suspension only 8 per cent of the investments held by WEIF could be sold within seven days. Under rules in place at the time, investors should have been able to access their funds within four days,” it said. 

“WIM and Mr Woodford did not react appropriately as the fund’s value declined, its liquidity worsened, and more investors withdrew their money. This disadvantaged investors who remained in the fund, compared to those who had withdrawn their investment before the fund was suspended,” the FCA continued. 

“The FCA has concluded that Mr Woodford held a defective and unreasonably narrow understanding of his responsibilities. Despite his senior role, he did not accept that he had a responsibility to oversee the management of the fund’s liquidity, including in interviews conducted by the FCA,” the regulator said. “He also failed to provide proper oversight of WIM’s relationship with Link Fund Solutions (Link), the WEIF’s authorised corporate director, including after Link raised concerns about the fund’s liquidity.”

The FCA added that it considered that Woodford’s and WIM’s failings led to a significantly increased risk of the fund being suspended.