19 June 2019
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The Guernsey stock exchange (TISE) shared concerns about the listed assets of Neil Woodford's with the UK financial watchdog even after the fund was frozen.
The 20-minute call from TISE to the UK's Financial Conduct Authority on June 7 "shared areas of potential regulatory concerns regarding the Fund's composition and valuations, and signposted the source materials for these concerns," according to an itemised list of communications between TISE and the FCA between April and this month, and provided to the Treasury select committee this Wednesday, the FT reports.
Britain's markets watchdog said it had opened a formal investigation into the suspension of Neil Woodford's flagship equity income fund earlier this month and first had concerns more than a year ago.
Woodford is finished; once your reputation is damaged like that there is no way back"
In a letter to the FCA's boss Andrew Bailey, Treasury Select Committee Chair Nicky Morgan asked whether the regulator "initiated any formal investigation related to the events that led to the suspension of the fund".
Bailey responded, noting that an investigation had been opened but said he could not comment further.
The suspension of Woodford Equity Income at the start of June attracted the attention of the regulator, with the FCA noting the mismatch in liquidity offered by an open-ended fund like Woodford's and the nature of its holdings (unlisted, so not easy to sell quickly) is an issue.
Following the fallout, the FCA and other bodies have come under criticism for failing to act sooner.
According to the letter published on Wednesday, TISE wanted to set up a formal information-sharing agreement, or memorandum of understanding, with the FCA but the latter declined on the basis that it already had an MoU with the Guernsey regulator and did not enter into such agreements with exchanges.
Fidelity said personal investors will no longer be able to buy new units in Woodford Income Focus, but will still be able to withdraw money. The Income Focus fund remains open, but has consequently seen outflows in the fallout from the gating, with assets falling from £500m to £325m.
Bill Vasilieff, chief executive officer at Novia Financial, said he "can understand what Fidelity has done" as "fund performance has been truly dire" and "everyone is heading for the exit".
"Even with quoted stocks, large redemptions in a fire sale can depress prices and investors are probably thinking to get out while they can," he said.
"We are not getting any money from advisers into the funds," he added. "Advisers know if they put money into Woodford their clients won't thank them. Woodford is finished; once your reputation is damaged like that there is no way back."
The Woodford Equity Income suspended trading on June 3 due to a vast swathe of redemptions.
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