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Fears of 'whitewash' as Neil Woodford plots comeback

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Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·5 min read
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A screengrab of Neil Woodford taken from a YouTube video. Photo: Woodford Investment Management/PA
A screengrab of Neil Woodford taken from a YouTube video. Photo: Woodford Investment Management/PA

Pressure is mounting on the UK's financial watchdog to respond to Neil Woodford's planned comeback.

Former star stock picker Woodford told the Sunday Telegraph over the weekend he was plotting to launch a new venture in Jersey, just under two years after the spectacular collapse of his last investment company. Both professional and small-time investors lost over £1bn (£720m) in the collapse of Woodford Investment Management.

The potential comeback has sparked outrage among investors, many of whom feel Woodford was at fault for the collapse. Regulators are investigating but no action has been taken so far.

READ MORE: Neil Woodford plots comeback after spectacular business collapse

Gina Miller, a fund manager and co-founder of the True and Fair Campaign who shot to fame for her Brexit Supreme Court case, said Woodford's plans made a "mockery" of UK regulation and were an "insult" to investors who backed his last venture.

"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," Miller and her husband Alan wrote in a letter sent to the Treasury Select Committee on Wednesday.

The Millers are calling for the Treasury Select Committee to hold a full independent inquiry into the Woodford saga, which they said had "alarming regulatory and public policy implications."

Businesswoman Gina Miller. Photo: Steve Taylor/SOPA/LightRocket via Getty
Businesswoman Gina Miller. Photo: Steve Taylor/SOPA/LightRocket via Getty

The UK's Financial Conduct Authority (FCA) is investigating the collapse of Woodford Investment Management but has yet to take any action. The regulator is now facing public pressure to clarify what it is investigating, when it plans to report its findings, and to take action in the interim to prevent Woodford's comeback.

The Millers said it was "shameful that the FCA has allowed Mr Woodford to remain on its Register and to continue as an authorised person whilst its investigation meanders on."

READ MORE: Fallen stockpicker Neil Woodford closes business and quits funds

"Here you have a massive scandal that... [is] going to be whitewashed when it comes out," Gina Miller told Yahoo Finance UK. "This just can’t be allowed to happen."

In her letter to MPs, Miller and her husband called delays to the investigation "an insult to the hundreds of thousands of small investors whose lives have been turned upside down, many of which have lost their life savings," Miller told Yahoo Finance UK there had been a "denial of justice for so many victims."

"It’s the old saying — justice delayed is justice denied," she said.

The Millers believe the FCA's investigation is too narrow. They called on the Treasury Select Committee to investigate the roles of both the FCA and investment platforms like Hargreaves Lansdown in the saga.

READ MORE: Star fund manager Neil Woodford 'sailed close to the wind'

"When you have these high-profile scandals and they’re not addressed, it just damages our industry," Miller told Yahoo Finance UK. "These scandals, one after the other, and high-profile ones like these, unless they are acted on and investigated in a timely manner, really damage all of us."

Financial Conduct Authority HQ in the Canary Wharf business district of London. Photo: Chris Helgren/Reuters
Financial Conduct Authority HQ in the Canary Wharf business district of London. Photo: Chris Helgren/Reuters

Mark Steward, director of enforcement and market oversight at the FCA, defended the watchdog in a statement released to the press late on Tuesday evening. He said the regulator's investigation was "progressing, though there has been some impact on accessing certain documents and witnesses during the pandemic."

"I recognise the time taken to investigate causes frustration," Steward said. "It is vital we investigate thoroughly and investigations are not limited at their outset.

"Instead, 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. It is important as the decision-makers on investigations that we do not prejudge their conclusion."

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Any new Woodford venture would need approval from the regulator and Steward said the FCA would take into account "fitness of its management." He said the FCA was in touch with its counterpart in Jersey to share information on the case.

Comments about the scope of the FCA's investigation were "purely speculation," Steward said.

Representatives for Neil Woodford and Woodford Funds declined to comment.

READ MORE: 'I take responsibility' for failure to stop £236m 'suspected fraud', says Bank of England chief

Neil Woodford was one of Britain's best-known and most successful fund managers, building his reputation during a quarter-century career at Invesco. He left to set up his own venture in 2014 and attracted billions from investors.

After a successful few years, Woodford's funds began to underperform. Investments in unlisted businesses also raised eyebrows. Crisis struck in 2019 when a major investor tried to withdraw money. Facing a liquidity crunch, Woodford was forced to suspend withdrawals from his biggest fund, the Equity Income Fund, which had £3.1bn under management at the time. The suspension ultimately led to the collapse of Woodford's entire business.

In his interview with the Sunday Telegraph, Woodford apologised to investors but blamed his company's failure on its fund services provider, Link Fund Solutions, which ultimately took the decision to shut down Woodford's biggest fund.

Miller said she was "alarmed" by this assessment, which she disagreed with. In July 2019, prior to the collapse of Woodford's business, then-Financial Conduct Authority (FCA) chief executive Andrew Bailey said the money manager had “sailed close to the wind” in his conduct.

"I wonder what it is he’s learnt necessarily," Miller said.

The Millers raised concerns with the FCA about Woodford's illiquid investments as far back as 2017, Gina said, raising concerns about whether the regulator was up to the job.

"Regulatory failure in scandal after scandal has to be addressed," Miller said. "It’s not about pointing the finger. We have to have strong regulators in our sector."

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