How DID they let it happen? Now regulators come under fire over crisis engulfing star fund manager Neil Woodward
The City watchdog is under fire for failing to spot warning signs of the growing crisis at Neil Woodford’s fund management empire.
Lord Myners, who was City minister during the banking crash, said the Financial Conduct Authority (FCA) was not ‘awake’ when Woodford started ‘clever dealings’ that should have set alarm bells ringing.
The peer compared the regulator to crime scene investigators from TV show Line Of Duty ‘who arrive after the damage has been done and did not anticipate what was happening even though there were clear warning signs that things were going badly’.
Warning signs: Lord Myners said the Financial Conduct Authority was not ‘awake’ when Neil Woodford started ‘clever dealings’ that should have set alarm bells ringing
His broadside comes after Nicky Morgan, the chairman of the Commons Treasury committee, also said FCA chiefs and the Bank of England would face questions in Parliament about the ‘troubling episode’.
Woodford blocked savers from accessing money they have in his flagship fund on Monday, in a bid to stop investors rushing to the exit.
Hundreds of millions of pounds had flowed out of Woodford Equity Income in a matter of weeks, after poor performance caused many investors to lose faith.
The crisis was partly triggered because the fund had several holdings in private companies – or ‘illiquid’ stocks – which are difficult to trade.
That meant that Woodford struggled to raise enough money to pay back investors who wanted to withdraw their cash – prompting the so-called ‘gating’ of the fund.
Woodford has also been forced to reorganise his holdings in recent months – shifting them between different funds – so that he does not break rules over how many illiquid assets his main fund is allowed to have.
Myners said the FCA should have scrutinised the illiquid investments more closely. He also criticised Linked Financial Solutions, the firm tasked with the running and oversight of the fund, saying it was not independent enough.
Myners told the BBC’s Today programme: ‘Woodford was a star fund manager, he was given far too much freedom.
‘There was somebody meant to be watching him on a daily basis, a company called Linked Financial Solutions, it doesn’t look as though they were, and in the background we have the FCA.
He had a performance record playing cricket and then he decided to play baseball. The FCA should have been awake.’ MPs will grill FCA chief executive Andrew Bailey on June 25.
John Mann, a Treasury committee MP, said: ‘The FCA should have been in discussions with Woodford for some time – so it is perplexing that they have not been.’
The FCA said it was aware of the situation. Linked Financial Solutions insisted it was independent and had acted ‘in full accordance’ with its obligations.