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Woodford fallout: FCA to examine fund buy lists as MPs circle
By Michelle McGagh 11 Jun, 2019
https://citywire.co.uk/investment-trust-insider/news/woodford-fallout- fca-to-examine-fund-buy-lists-as-mps-circle/a1238348

Woodford fallout: FCA to examine fund buy lists as MPs circle
Financial Conduct Authority (FCA) boss Andrew Bailey has said the regulator will re-examine platform's fund buy lists following the suspension of the Woodford Equity Income fund.

Speaking on the BBC's Today programme, Bailey said the regulator would 'look at these again' just two months after a platform study that effectively handed them a clean bill of health.

The support of the UK's online stock broker Hargreaves Lansdown (HRGV) was a major factor behind the huge amounts Woodford was able to raise for his Woodford Equity Income fund, which stood at £10.2 billion at its peak, falling to £3.7 billion last week when the fund was suspended.

Customers of Hargreaves, which featured the fund in its Wealth 50 fund buy list, owned £3.4 billion of the fund at its peak, falling to £1.4 billion by the end of last year.

'We look at how funds construct these best-buy tables, and the principles are that they should be impartial, do it thoroughly and they should make sure it's done properly in the sense that they should be up-to-date,' said Bailey.

'We will look at these again to ensure that they and indeed others - it's not just a point about Hargreaves Lansdown - have abided by those principles.'

Bailey also added to pressure on Woodford over the fees he is charging while the fund is suspended,

Bailey said while the manager should review his charges, which range between 0.5% and 0.75% on most platforms, 'we need him to manage these assets now more than ever'.

'His job now is to get this fund back into a position where there can be orderly trading, so he has his work cut out now,' he said.

Woodford has faced calls to drop his fund fee while his £3.7 billion Woodford Equity Income fund is suspended. Online stockbroker Hargreaves Lansdown has dropped its 0.45% platform charge on its customers' holdings in the fund and urged the manager to do the same.

MP Nicky Morgan, chair of the Treasury committee, has also urged Woodford to waive the fee. Morgan yesterday questioned how ‘alert’ the regulator was over the issues leading up to the suspension of Woodford's fund, in a letter to the FCA ahead of its appearance before the committee on 25 June.



In a letter to Bailey, Morgan (pictured) said that ‘questions have been raised about the FCA’s alertness to the problem’.

She said there was ‘clearly a significant concern’ about the impact the suspension has had on investors, ‘as well as the wider regulation and supervision of funds’.

In her letter she said Bailey would need to answer questions around how long the fund suspension should be, whether there should be a maximum length, and when the FCA would intervene.

The committee has also asked for a timeline of the FCA's contact with authorities in Guernsey. Citywire revealed in March that Woodford had listed his stakes in unquoted stocks in Guernsey as a means of remaining within the City regulator’s rules on funds’ unquoted holdings, which must not exceed 10%. Since those stakes have listed, not a single share has been traded.

The FCA said last week that it was examining the manager's listing of its stakes in Guernsey, and was in talks with the International Stock Exchange (Tise). Tise responded by saying it had made several attempts to contact the FCA in April but only secured a call in May.

Morgan said Bailey should also inform the committee on whether it had ‘initiated any formal investigation related to the events that led to the suspension’.

‘The committee will use Bailey’s response, and the FCA’s appearance before us later this month, to try and get to the bottom of this,’ said Morgan.



Bailey admitted in a letter in the Financial Times that the suspension of Woodford’s (pictured) flagship fund had raised questions about the UK’s regulatory approach of investment in illiquid assets, to which the fund had a high weighting.

The spike in redemptions and the fund’s inability to meet withdrawals raised questions around whether the rules requiring assets to be liquid were working appropriately, said Bailey.

Former City minister Lord Myners has criticised the regulator over its handling of the Woodford suspension, saying it ‘should have been awake’ and that it missed ‘clear warning signs’.

The suspension of the fund has sent shockwaves through the investment industry, leading Bank of England governor Mark Carney to call for tougher fund rules on illiquid investments, although he did not specifically name Woodford’s fund.

He said there was ‘a structural mismatch between the frequency with which they offer redemptions ad the time it would take them to liquidate their assets’.

Comments

JohnR6 months ago
Mr. Bailey would do well to take his own advice.
His resignation would not go amiss.
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[Whitehall_Bin_Men]

yes, @RainNewtonSmith seems wifully blind to Bailey's record at the FCA. This Telegraph article is pretty damning, but misses out on other failures such as over RBS's global restructuring group and Clydesdale Bank's tailored business loans. https://t.co/X9zEFpplom

— Ian Fraser (@Ian_Fraser) December 20, 2019

[TonyGosling]

2009-13 RBS Global Restructuring Group (GRG) destroyed 16k UK Businesses
2009-19 Lloyds Business Support Unit (BSU) £1bn fraud
Mar 2019 London Capital & Finance (LCF) £236m fraud
Jun 2019 Hargreaves Lansdown recommended Neil Woodford Fund up to £2bn fraud https://youtu.be/f5ZiguT2QkA
FCA crimes of new Bank of England governor Andrew Bailey Ian Fraser

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