Link Fund Solutions (LFS) failed to act with due skill, care and
diligence in its management of the Woodford Equity Income Fund
(WEIF), according to findings published by the Financial Conduct
Authority (FCA).
The FCA found that between 31 July 2018 and the fund's suspension
on 3 June 2019, LFS failed to manage the liquidity of the fund -
or how easily assets in the fund could be turned into cash - so
that investors could access their money at short notice.
LFS also failed to properly oversee Woodford Investment
Management (WIM) or to sufficiently ensure that concerns about
liquidity were acted on. In a separate action, the FCA has issued
warning notices to Neil Woodford and WIM proposing to take action
against them for their conduct in the management of the WEIF.
The FCA has published a warning notice
statement about its proposed action against Mr Woodford
and WIM. This includes the FCA's allegations that Mr Woodford had
a defective and unreasonably narrow understanding of his
responsibilities for managing liquidity risks. It also alleges
that he and WIM failed to ensure that the WEIF's liquidity risk
framework was appropriate, to respond appropriately to the
ongoing deterioration in the fund's liquidity, and to maintain a
reasonable liquidity profile for the WEIF.
The warning notices given to Mr Woodford and WIM are not the
FCA's final decisions and both parties have the right to make
representations to the Regulatory Decisions Committee. In the
event that the FCA makes final decisions, it intends to make its
findings public at the appropriate point, but it cannot
provide any further detail beyond the warning notice statement at
this stage, including about any proposed sanctions.
The LFS final
notice confirms the failings which led to the FCA's
investigation and subsequent agreement from LFS to settle the
enforcement case and provide compensation to those affected.
Those invested in the WEIF when it was suspended are starting to
receive a share of the up to £230 million redress scheme, which
was approved by the High Court in February.
The FCA has also confirmed that there are no other parties under
investigation in relation to the Woodford Equity Income Fund.
Therese Chambers, joint executive director of enforcement and
market oversight, said:
'Link Fund Solutions' job was to properly manage the Woodford
Equity Income Fund and to protect investors' interests. Their
failings led to losses for those trapped in the fund when it was
suspended.
'It is right that they compensate investors for the losses that
resulted from their failings, and we're pleased that the scheme
has started making payments.'
Notes to editors
-
Final Notice 2024: Link Fund
Solutions Limited
-
Warning Notice Statement
24/3
- The FCA believes that LFS breached Principle 2 (skill, care
and diligence) and Principle 6 (fair treatment of customers) of
its principles for business.
- The FCA would have imposed a fine of £50m on LFS (which would
have been reduced to £35m in the case of settlement). However,
imposing this penalty would reduce the amount which consumers
receive back.
- Warning notices are issued by the FCA's Regulatory Decisions
Committee (RDC). They are a notice that the FCA proposes to take
enforcement action. Following the issuing of a warning notice,
the individual or firm has a right to respond by making written
and oral representations to the RDC.
- If appropriate, the FCA will publish a warning notice
statement with a brief summary of the facts. These usually only
name firms. However, individuals may be named in certain
circumstances, including where it is not possible to describe the
nature of the FCA's concerns without making it possible to
identify the individual, or it is necessary to maintain public
confidence in the financial system or market.
