The Treasury Committee has called for the Financial Conduct Authority (FCA) to disclose more information on what action will be taken following the suspension of Woodford Investment Management's flagship fund.
The chair of the Treasury Select Committee Nicky Morgan MP has written an open letter on behalf of the committee to the FCA's chief executive Andrew Bailey, calling for more transparency on the discussions concerning the suspension of the LF Woodford Equity Income fund.
The letter includes a request for the FCA to provide a timeline of the FCA's supervisory contact with the authorities in Guernsey and those related to the fund and whether the FCA has launched a formal investigation related to the events leading to the suspension.
The FCA must set out the details of its supervisory contact with the Woodford fund, whether it will investigate the events that led to the suspension of the fund."
Bailey has been given until Tuesday 18 June to issue a response.
Morgan commented: "The FCA must set out the details of its supervisory contact with the Woodford fund, whether it will investigate the events that led to the suspension of the fund, and more broadly, how long such a suspension should be.
"Questions have been raised about the FCA's alertness to the problem. The Committee will use Mr Bailey's response, and the FCA's appearance before us later this month, to try to get to the bottom of this."
This follows on from an announcement that investment funds could soon be subject to new rules from the FCA as a result of the suspension of the Woodford Equity Income fund last week.
In the wake of the gating, the FCA is considering a ban on daily withdrawals from funds holding illiquid assets and forcing funds to keep to assets in jurisdictions chosen by investors, its chief executive Andrew Bailey has warned.
Writing for the FT, Bailey said the regulator will consider "lessons" learned from the Woodford meltdown as it finalises new rules based on its ongoing consultation on illiquid assets and open-ended funds.
However, he acknowledged wider changes affecting investment funds would have to be done at an EU level, under the UCITS directive.
Bailey said: "The Woodford fund points to a potential problem with the limits on illiquid assets: the purpose of these limits is to ensure that the fund remains liquid.
"Simply listing an unquoted company overseas does not in itself make the stock liquid. I am a strong supporter of internationally open markets. But investors have a right to choose the jurisdiction in which they invest and for it to be maintained.
"It is not sensible to provide for daily dealing and redemption in open-ended funds that hold a large exposure to illiquid assets, including those that while listed are not regularly traded."
A potential ban of open-ended investment funds holding illiquid assets would likely affect Merian Global Investors and Invesco Perpetual, according to the Telegraph.
Bailey's comments also highlight reports that the FCA is investigating Woodford's decision to skirt UCITS rules, which place a 10% on the amount a fund can hold in unlisted stocks, by investing in assets listed on the Guernsey stock exchange which rarely traded.
Bailey also encouraged platform providers to exercise their "responsibility thoroughly and in a timely fashion".
The crisis in Woodford's flagship fund has also resulted in questions asked of Hargreaves Lansdown, the customers of which held 31% of the gated fund at the end of last year, forcing CEO Chris Hill to publicly apologise to clients who are stuck in the suspended vehicle.
A version of this article was first published by Investment Week, a sister title to International Investment