Investigate ‘toothless’ FCA over Woodford failures, campaigners urge

The City watchdog is facing a furious backlash over its handling of the Neil Woodford savings scandal.

As the disgraced fund manager prepares to make an audacious comeback, the Financial Conduct Authority (FCA) has been accused of ‘dragging its feet’ over its investigation into the implosion of his investment empire.

And campaigners, MPs and peers are calling for a separate inquiry into the FCA and its supervision of Woodford Investment Management in the build-up to the collapse in 2019.

Under fire: Neil Woodford wants to launch a new fund while campaigners accuse the Financial Conduct Authority of ‘dragging its feet’ over its investigation into the implosion of his empire

Such an inquiry could heap further embarrassment on Andrew Bailey, who was chief executive of the FCA for four years until March 2020 when he became Governor of the Bank of England.

A separate review has already found Bailey and the FCA responsible for a number of failings over London Capital & Finance, which also collapsed in 2019, leaving 12,000 savers facing losses of up to £237million.

But the Woodford scandal was even more costly, and pressure is mounting on regulators to bar him from the fund management industry until a full investigation has taken place.

Hundreds of thousands of savers lost more than £1billion after Woodford’s Equity Income fund fell apart two years ago.

Many of them were customers of Hargreaves Lansdown, a Woodford cheerleader for years who critics also believe should be investigated.

Liberal Democrat peer Lord Lee, said: ‘I would have thought Woodford should certainly wait for the outcome of the FCA’s investigation before making a return. Everybody is taken aback that he’s come back so quickly.’

One British fund manager, who did not wish to be identified, said: ‘I believe in being innocent until you’re proven guilty, but letting Woodford go out there and manage money for people ahead of the conclusion of the investigation I think is wrong.’

Collapse: Hundreds of thousands of savers lost more than £1billion after Woodford’s Equity Income fund fell apart two years ago.

Woodford’s largest fund, Woodford Equity Income, was frozen in 2019, locking in £3.7billion of savers’ money.

It has since been wound up, with many investors getting back far less than they put in.

Woodford sparked anger last weekend as he revealed plans to launch a new firm, aimed at professional investors.

Cliff Weight, a director at Sharesoc which represents small investors, is furious at the FCA’s delay. He said: ‘They are toothless and are moving at a glacial pace. They are dragging their feet and not doing enough.’

Justin Modray, of Candid Financial Advice, said: ‘I’m mystified why there has not yet been an inquiry into the FCA’s role in the Woodford fiasco. There was arguably a catalogue of oversights.’

Fund manager Alan Miller of SCM Direct, who campaigns for transparency in financial services, added: ‘It is simply immoral that the FCA inquiry commenced in 2019, is yet to be completed and does not look into the FCA’s role anyway.’ 

He and his wife Gina Miller wrote to the House of Commons Treasury Select Committee yesterday, saying the FCA’s delay was ‘nothing short of an insult to the hundreds of thousands of small investors’.

They demanded that the committee order an independent inquiry into the regulator ‘to avoid the habitual and depressing repetition of such scandals’.

‘Too often the perpetrators of financial wrongdoing seem to slip off the hook, many to start up new lucrative operations while it is ordinary savers who suffer the brunt of this wrongdoing,’ the Millers added.

Tory MP Kevin Hollinrake said the FCA was ‘asleep at the wheel’. ‘I think the Treasury Committee should be doing an inquiry, saying to the FCA: Why didn’t you look at this more closely?’ he said. 

Mark Steward, director of enforcement and market oversight at the FCA, said its investigation into ‘the events that led to the suspension’ of the Woodford Equity Income Fund ‘is progressing though there has been some impact on accessing certain documents and witnesses during the pandemic’.

He added: ‘I recognise the time taken to investigate causes frustration among those affected by a firm or fund failure and who are, understandably, looking for answers. 

We look at what all the evidence tells us before we make conclusions about what, if any, misconduct has taken place and who is responsible, if it has. It is only then that we can assess what, if any, sanction we should put in place.’

This post first appeared on Dailymail.co.uk