The UK Financial Conduct Authority (FCA) is pursuing legal action against former investment manager Neil Woodford for allegedly providing unauthorized investment advice. This development follows the FCA’s earlier decision to ban Woodford from holding senior management roles in the UK and issuing a £46m fine against him and his investment firm, following the 2019 collapse of his equity fund.
Why is the FCA taking action against Neil Woodford?
The FCA’s latest move centers on allegations that Woodford has been offering unauthorized investment advice online through a subscription-based service known as W4.0. According to the regulator, the parent company, W Four Point Zero FZE LLC, is registered in the United Arab Emirates. The FCA has stated that if Woodford’s activities require authorization, he must apply to the regulator or risk breaking the law. The watchdog has explicitly noted that it would consider its previous decision to ban Woodford when reviewing any new application for authorization.
What led to the collapse of the Woodford equity fund?
At its height, Neil Woodford’s equity fund was valued at over £10bn. Its 2019 collapse was driven by a series of poorly performing investments in companies such as Purplebricks, Burford Capital, and Provident Financial. Furthermore, the fund faced liquidity issues after Woodford invested in private, unlisted companies that proved difficult to sell. Following the fund’s suspension and subsequent closure, administrators returned money to approximately 30,000 investors at a significant loss.
How has Woodford responded to the FCA findings?
Neil Woodford and his investment management company have publicly challenged the FCA’s findings. Woodford Investment Management previously stated it “strongly disagree[d]” with the regulator, arguing that the responsibility for the fund’s liquidity—specifically the ability to sell holdings for cash—rested with Link Fund Solutions. The FCA, however, found in a report last year that Link “failed to act with due skill, care and diligence in its management.” Woodford and his firm are currently awaiting a hearing in the upper tribunal to contest the FCA’s ban and financial penalties.
What is the current status of the FCA ban?
The FCA’s ban and the £46m penalty are not yet formally in effect, as they remain subject to the outcome of the upcoming upper tribunal hearing. The regulator previously labeled Woodford as not a “fit and proper person” to perform regulated activities, citing a lack of competence, capability, and reputation. Despite this, Woodford has continued to promote his W4.0 service, with marketing materials claiming the platform is “like having Neil Woodford by your side.”
Frequently Asked Questions
Is Neil Woodford currently allowed to manage funds in the UK?
No. The FCA has announced plans to ban Woodford from holding senior manager roles and managing funds for retail investors. However, this ban is currently being challenged by Woodford in the upper tribunal, and the penalties will not formally apply until that process concludes.
What happens if the upper tribunal rules against Woodford?
If the tribunal sides with the FCA, the ban and the £46m fine will be upheld. Even if the ban were not in place, Woodford would still be required to apply for fresh authorization from the FCA for any new senior roles.
Where is the W4.0 service based?
According to the City watchdog, the parent company of the W4.0 service, W Four Point Zero FZE LLC, is registered in the United Arab Emirates.
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