Former star fund manager Neil Woodford and his eponymous asset management company have been fined a total of £45.9 million for failures in their management of the Woodford Equity Income Fund (WEIF).
The Financial Conduct Authority revealed that it has decided to issue the fine and that Woodford and Woodford Investment Management (WIM) have referred the ruling to the High Court.
Woodford was fined £5.888 million by the FCA, which said he was banned from holding senior manager roles and managing funds for retail investors, with his company fined £40 million.
Once the most popular fund in the UK and worth over £10 billion at its peak in 2017, WEIF was gated in June 2019 after a rush of redemptions that had sent its valuation crashing to around £3.6 billion. Suspension of the fund prevented a mostly retail investor base of around 300,000 investors from withdrawing their money.
Last year, the FCA issued a warning notice, accusing the fund manager of having a "defective and unreasonably narrow understanding" of managing liquidity risks, which ultimately led to the fund’s downfall and the collapse of his firm.
Today, the FCA said WIM and Woodford made "unreasonable and inappropriate investment decisions" between July 2018 and June 2019, and "disproportionately" sold more liquid investments and bought less liquid ones so that by the time of suspension only 8% of the investments held by WEIF could be sold within seven days, while rules at the time stipulated that investors should have access their funds within four.
"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 This disadvantaged investors who remained in the fund, compared to those who had withdrawn their investment before the fund was suspended."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 regulator noted that Woodford and WIM have not accepted their responsibility to oversee the management of the fund’s liquidity, considering that the failings "led to a significantly increased risk of the fund being suspended".
Steve Smart, joint executive director of enforcement and market oversight at the FCA, said: "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. 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."
WEIF's authorised corporate director, Link, was previously ordered by the FCA to carry out a £230 million redress scheme.
Thousands of out-of-pocket investors in WEIF also joined a £200 million class-action lawsuit against platform Hargreaves Lansdown.