The UK financial regulator is taking legal action against former investment star Neil Woodford for allegedly offering unauthorised investment advice online, months after announcing plans to ban him from the City.
Legal Action by the FCA
The Financial Conduct Authority (FCA) said it was seeking an injunction against Woodford and W4.0, a United Arab Emirates-registered company, to stop them carrying out “potentially unlawful activities”. The FCA stated: “The FCA has started civil proceedings against Mr Neil Woodford and W4.0. The FCA alleges that Mr Woodford and W4.0 are providing regulated investment advice and making financial promotions through the subscription-based platform, www.w4pz.com, without authorisation.”
Background to the Collapse
This action comes a year after the FCA announced it would ban Woodford from holding senior manager roles and managing funds for retail investors in the UK, following the collapse of his popular equity fund in 2019. At its peak, Woodford’s equity fund was worth more than £10bn, but it suffered from poorly performing investments in companies such as Purplebricks, Burford Capital, and Provident Financial. A combination of bad bets and investments in private unlisted companies led to the fund’s suspension and eventual collapse.
Woodford resigned in October 2019 and closed his investment company. Administrators later wound down the fund, returning money to many of its 30,000 investors at a steep loss. The FCA issued its decision last summer, banning Woodford from the City and fining him and his company a total of £46m.
Woodford’s Alleged Failures
In a damning report, the FCA said: “Mr Woodford is not a fit and proper person to perform regulated activities associated with managing open-ended funds and any senior management or significant influence function on the basis of his lack of competence, capability and reputation.” Both Woodford and his investment management company plan to challenge the fine and ban in the upper tribunal, though a hearing date has not been set.
Woodford Investment Management last year said it “strongly disagree[d]” with the FCA’s findings, blaming Link Fund Solutions for the fund’s liquidity issues. The regulator found that Link “failed to act with due skill, care and diligence”.
New Venture: W4.0
Despite the pending ban, Woodford launched a subscription-based investment service called W4.0, which allows investors to download and enact his strategies via their own accounts. On his blog, Woodford wrote: “Because we’re not bound by the constraints of fund launches or minimum sizes, I can share more strategies, more ideas, and more updates than would ever be possible in a traditional fund structure.” Marketing materials stated: “W4.0 is like having Neil Woodford by your side.”
The parent company of W4.0, W Four Point Zero FZE LLC, is registered in the UAE. When asked about the venture last August, the FCA said it was “engaging with Mr Woodford to satisfy ourselves that his activities do not require our authorisation”. The regulator warned that if authorisation is needed, “he’d need to apply to us or risk breaking the law”. The FCA added: “We’d take our decision to ban into account when considering any application for authorisation.”
The Guardian was unable to reach Woodford for comment.
