Neil Woodford, the former investment star who once presided over a fund worth over £10 billion, finds himself in hot water with the UK's Financial Conduct Authority (FCA). The FCA has initiated legal action against Woodford, alleging that he has been offering unauthorized investment advice online through a subscription-based platform called W4.0. This move comes as no surprise, given the recent ban imposed by the FCA on Woodford from holding senior manager roles and managing funds for retail investors in the UK, following the collapse of his equity fund in 2019. The fund's suspension and eventual collapse were attributed to a series of poorly performing investments and Woodford's decision to invest in private, unlisted companies that were difficult to sell.
Woodford's fall from grace has been dramatic. His equity fund, once a flagship for investors, suffered a string of bad bets, including investments in companies like estate agent Purplebricks, finance company Burford Capital, and doorstep lender Provident Financial. The fund's suspension and eventual closure led to a steep loss for investors, with administrators returning money to the 30,000 investors at a significant loss. The FCA's damning report on Woodford's management failures concluded that he was not a fit and proper person to manage open-ended funds, citing his lack of competence, capability, and reputation.
The FCA's latest action against Woodford is a continuation of its efforts to hold him accountable for his actions. The regulator is seeking an injunction to stop Woodford and W4.0 from carrying out potentially unlawful activities. Woodford's response to the FCA's ban has been defiant, with his investment management company stating that it strongly disagrees with the findings and blaming the Link Fund Solutions, the company in charge of the fund's liquidity, for the collapse. However, the FCA's penalties and ban will not be formally applied until after the hearing, and Woodford would still need to apply for fresh authorization for any new senior roles.
Woodford's new venture, W4.0, appears to be a subscription-based investment service that allows investors to download and enact his strategies via their own accounts. The marketing materials for W4.0 claim that it is like having Neil Woodford by your side, but the FCA is not convinced. The regulator is engaging with Woodford to ensure that his activities do not require authorization, and if he does, he would need to apply for it or risk breaking the law. The FCA's decision to ban Woodford from the City will be taken into account when considering any application for authorization.
The case of Neil Woodford highlights the importance of regulatory oversight in the financial industry. The FCA's actions serve as a reminder that even those who have enjoyed past success are not immune to scrutiny. As Woodford's case demonstrates, the consequences of unauthorized investment advice can be severe, and the FCA is determined to hold individuals and entities accountable for their actions. The outcome of this legal battle will have significant implications for the future of investment management in the UK and beyond.
