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Brokers waive fees for Woodford clients as regulators demand answers

The Financial Conduct Authority wants to understand Woodford’s offshore links and Hargreaves Lansdown calls on the company to end fee charges.

File photo dated 09/03/17 of the London skyline as seen from Tower 42 with the ‘Gherkin’ (foreground), 30 St Mary Axe and Canary Wharf (background) prominent. Neil Woodford’s fund urged to cut fees
File photo dated 09/03/17 of the London skyline as seen from Tower 42 with the ‘Gherkin’ (foreground), 30 St Mary Axe and Canary Wharf (background) prominent. Neil Woodford’s fund urged to cut fees

The financial watchdog is demanding answers from Neil Woodford and his brokers over their decision to invest so heavily in unlisted companies based offshore in Guernsey.

There was no suggestion of wrongdoing at Woodford Investment Management, the Financial Conduct Authority said, but officials want to understand the chain of events leading to investors being told on Monday they would not be able to withdraw their cash from the flagship Woodford Equity Income Fund.

The news comes as one of Mr Woodford’s biggest supporters, broker Hargreaves Lansdown, said it would waive all fees it charges customers who invested in the suspended fund until the freeze ends.

We have been in communication with Woodford Investment Management to explain why we think this is the right thing to do and have put pressure on them to do the same Hargreaves Lansdown

Bosses at the firm also called on Mr Woodford to follow suit and no longer charge fees on the money investors cannot access.

Emma Wall, head of investment analysis at Hargreaves Lansdown, said: “We do not think it is fair to charge our clients a fee while they cannot trade in the fund.

“This is a frustrating and difficult time for clients and we are doing what we can to support them.

“We have been in communication with Woodford Investment Management to explain why we think this is the right thing to do and have put pressure on them to do the same.”

But Mr Woodford could face even tougher demands from authorities with the FCA wanting details on his dealings in Guernsey.

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Neil Woodford (PA)

Mr Woodford used the Guernsey stock exchange to list the stakes he had in unlisted companies there and it has been suggested he did this to avoid breaching UK investment rules.

In a statement, the FCA said: “The FCA has been in discussions with (the company) regarding the circumstances around the listing of certain of the fund’s assets on (Guernsey’s) exchange.

“Where the FCA believes there are circumstances suggesting serious misconduct or non-compliance with the rules it may open an investigation.”

Since suspending the fund on Monday, following a request from Kent County Council to withdraw £263 million it had invested with Mr Woodford, the founder has vowed to sell all the fund’s stakes in unlisted companies and reinvest the money into smaller businesses on the FTSE 350 index in London.

The FCA added: “We expect all firms involved to uphold their obligations to act in the best interests of all investors and to ensure the fund’s assets are sold in an orderly manner. A suspension should last no longer than necessary.”

PA

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