Link Fund Solutions (LFS) failed to act with care and due diligence in its management of the Woodford Equity Income Fund (WEIF), new findings published by the Financial Conduct Authority (FCA) have stated.
The FCA found that between July 2018 and the fund’s suspension in June 2019, LFS failed to manage the liquidity of the fund – specifically 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, the regulator said.
In a separate action, the FCA has issued warning notices to Neil Woodford and WIM proposing to act against them for their conduct in the management of the WEIF.
The FCA has published a warning notice statement about its proposed action against Woodford and WIM, which includes the allegations that 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.
Joint executive director of enforcement and market oversight at the FCA, Therese Chambers, 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.”
Those invested in the WEIF when it was suspended are starting to receive a share of up to £230m from the 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 WEIF.
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