It’s five years since the Financial Conduct Authority (FCA) began probing the spectacular collapse of Neil Woodford’s investment empire, which trapped 300,000 savers nursing losses in one of the biggest scandals of the last decade.
And what does it come up with?
A warning notice, and weasel-worded criticisms that Woodford had a ‘defective’ understanding of his responsibilities in the run-up to the collapse of his £3.7billion Woodford Equity Income Fund.
Defective? Far too polite, and there’s growing criticism in the industry that the City regulator has been far too lax.
Shameful is more the word to describe what went on at Woodward’s fund, which at its peak managed £15billion.
Probe: The FCA said Woodford had a ‘defective’ understanding of his responsibilities in the run-up to the collapse of his £3.7bn Woodford Equity Income Fund.
The FCA claims it was Woodford’s ‘unreasonably narrow understanding of his responsibilities for managing liquidity risks’ which led to the downfall in 2019.
Does the regulator really believe that, after 25 or so years of investing at such a level that he was dubbed the UK’s Warren Buffett, he did not understand his responsibilities for managing risk? Bizarre!
Yet at the same time the watchdog states the obvious: that his firm, Woodford Investment Management (WIM), failed in its oversight of the fund’s liquidity – how easily assets could be turned into cash for investors to withdraw at short notice.
In another warning notice for Link Fund Solutions, the administrator used to monitor the fund’s liquidity, the FCA said it ‘failed to act with due skill, care and diligence in its management’.
Indeed, Woodford investors are to receive a share of up to £230million in redress from Link after a High Court hearing in February.
Woodford and WIM are challenging the FCA’s preliminary findings. Their lawyers, WilmerHale, state they disagree with findings, which they say are ‘unprecedented and fundamentally misconceived’.
They say the FCA’s only criticisms of Woodford relate to matters relating to the ‘fund’s liquidity framework, which was, in fact, Link’s responsibility… and the FCA’.
Cheekily, they are shifting the blame to Link, claiming that staff at WIM were told by Link that the FCA knew those details.
What’s more, they say the FCA had been monitoring liquidity since 2018, which rather suggests they are implying the watchdog was asleep at the wheel.
It’s the Regulatory Decisions Committee, part of the FCA, which will decide what action to take. It can issue fines or bans.
Woodford and his firm are bound to appeal against any action against it by the committee, and then have the right to appeal against any decision at the Upper Tribunal. This is only the start of what promises to be a long legal battle.
Woodford is not giving in: he spent many of the millions of pounds he made learning to ride to such a level he was and expert three-day eventer. His Irish gelding went by the name of Willows Spunky.
Trade-off
Grumbling about Pascal Soriot’s proposed pay rise paid off. Investors have been rewarded for giving the go-ahead for the AstraZeneca boss to earn another £1.8million this year, taking his package to around £19million, with their own sweetener.
Hours before yesterday’s crunch vote, investors were offered a 7 per cent increase in dividends, and the promise that dividend policy will be progressive.
That’s a decent trade-off for the Frenchman, who has delivered astonishing returns over the decade he has been in charge of the drug-maker.
Shares have more than tripled to more than £10. Soriot has made £135million to date.
It’s not often one can say a chief executive deserves so much money but in Soriot’s case, he’s probably worth it. But what does he spend it on? We should be told.
Yorkshire gold…
In contrast, is Susan Allen, the new chief executive of the Yorkshire Building Society, worth a £2.5million ‘golden hello’?
The society says it’s common practice within financial services.
Not so sure about that. It comes on top of a base salary of £785,000 and a bonus of £777,000, which takes total pay to more than £4million.
One member is urging fellow members to oppose the award. A golden hello that size should have gold-plated handcuffs.
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