It is five years since the Financial Conduct Authority (FCA) began investigating the spectacular collapse of Neil Woodford’s investment empire, which caught 300,000 savers suffering losses in one of the biggest scandals of the last decade.
And what comes to mind?
A warning notice and criticism in weasel terms that Woodford had a “flawed” understanding of its responsibilities in the run-up to the collapse of its £3.7bn Woodford Equity Income Fund.
Defective? Too polite, and there is growing criticism in the industry that the City regulator has been too lax.
Shameful is more the word to describe what happened at Woodward’s fund, which at its peak managed £15bn.
Investigation: The FCA said Woodford had a “flawed” understanding of its responsibilities in the period before the collapse of its £3.7bn Woodford Equity Income Fund.
The FCA claims it was Woodford’s “unreasonably limited understanding of its responsibilities in managing liquidity risks” that led to the fall in 2019.
Does the regulator really believe that, after about 25 years of investing at such a level that he was dubbed the UK’s Warren Buffett, he failed to understand his responsibilities in risk management? Strange!
Yet at the same time, the watchdog is stating the obvious: that his firm, Woodford Investment Management (WIM), failed in its oversight of the fund’s liquidity – how easily the assets could be converted into cash for investors to use. They will withdraw in a short time.
In a separate warning notice for Link Fund Solutions, the manager used to monitor the fund’s liquidity, the FCA said it “failed to act with due skill, care and diligence in its management”.
Indeed, Woodford investors will receive a share of up to £230m in compensation from Link following a High Court hearing in February.
Woodford and WIM are challenging the FCA’s preliminary conclusions. His attorneys, WilmerHale, say they disagree with the findings, which they consider “unprecedented and fundamentally flawed.”
They say the FCA’s only criticism of Woodford relates to issues relating to the fund’s “liquidity framework, which was, in fact, the responsibility of Link… and the FCA”.
They are blatantly putting the blame on Link, claiming that Link told WIM staff that the FCA knew those details.
What’s more, they say the FCA had been monitoring liquidity since 2018, which rather suggests they are implying the watchdog was asleep at the wheel.
It is the Regulatory Decisions Committee, part of the FCA, that will decide what measures to take. May impose fines or bans.
Woodford and his firm are required to appeal any action against them by the committee, and then have the right to appeal any decision to the High Court. This is just the beginning of what promises to be a long legal battle.
Woodford is not giving up: he spent many of the millions of pounds he earned learning to ride to such a level that he was an expert in three-day events. His Irish gelding was called Willows Spunky.
Compensation
Complaints about the salary increase proposed by Pascal Soriot bore fruit. Investors have been rewarded for giving the AstraZeneca boss the nod to earn another £1.8m this year, taking his package to around £19m, with his own sweetener.
Hours before yesterday’s decisive vote, investors were offered a 7 percent increase in dividends and a promise that dividend policy will be progressive.
This is decent compensation for the Frenchman, who has delivered impressive returns during his decade at the helm of the drugmaker.
Shares have more than tripled to over £10. Soriot has earned £135 million to date.
It’s not often you can say a CEO deserves that much money, but in Soriot’s case, he probably is. But what does he spend it on? We should tell each other.
Yorkshire Gold…
Conversely, is Susan Allen, the new chief executive of Yorkshire Building Society, worth a £2.5m “golden hello”?
The society says it is common practice within financial services.
I’m not so sure about that. It adds to a base salary of £785,000 and a bonus of £777,000, taking the total salary to more than £4m.
One member urges his colleagues to oppose the award. A golden salute that size should have gold-plated handcuffs.
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