Two years after the collapse of Neil Woodford's Equity Income fund, and with 300,000 investors still awaiting answers from the regulator despite being set to lose £1bn from its liquidation, industry commentators are calling for a solution to be found sooner rather than later in order to reinstate the public's faith in financial services.
The Financial Conduct Authority (FCA) launched an enforcement probe in June 2019, but it recently admitted to the Treasury Select Committee this was unlikely to conclude until the end of this year, with no "precise timeline" for its outcome.
'Snail's pace' investigation
Campaigner Gina Miller slammed the FCA's credibility as a fit-for-purpose regulator, calling for the watchdog to finish the statutory inquiry as soon as possible and then launch an independent investigation of its own regulatory "failures".
"The snail's pace progress to date by the FCA is an utter disgrace and an insult to the 300,000 investors who have lost more than a billion pounds," she said.
"The update from the FCA to the Treasury Select Committee indicates their investigation is likely to take three years to complete and does not even cover its own regulatory role in this scandal, or that of Hargreaves Lansdown."
According to her True and Fair Campaign, the last time the FCA made any referral to Woodford in its board minutes was October 2019, "which seemingly infers the scandal is not important enough to merit updating the board".
The FCA investigation is focused on the behaviour of Woodford and Link Fund Solutions, and whether they acted in the interests of all its investors by reducing the liquidity of the fund.
Ben Yearsley, co-founder of Fairview Investing, said the investigation should not be rushed as "you do not want the FCA not looking at it properly".
He added that the question is whether the oversight was correct: "Did anyone overstep what they were legally allowed to do? Were procedures followed correctly? And more importantly, what will be done to stop this kind of thing from happening again?"
Adrian Lowcock, independent commentator and former head of personal investing at Willis Owen, agrees that it is more important the regulator gets the investigation right than it is to rush things. However, he believes a little more information on the progress of the report would be useful for investors.
"The lack of progress is hugely frustrating for investors as it does not help them understand what happened and who is responsible for that. It could also impact any lawsuits and delay compensation claims," Lowcock told IW.
Trapped in limbo
Leigh Day, one of the law firms representing investors in the former fund, said that the FCA does not operate to the strict deadlines imposed by a court timetable in a litigated case, making it possible that a court judgment may be obtained before the FCA finally concludes its investigation. But it noted that as the investigation drags on, investors are suffering.
Meriel Hodgson-Teall, associate solicitor at Leigh Day, said: "Unfortunately, it is unlikely that the FCA will complete its investigation and reach a decision to issue fines or discipline any of the parties involved any time soon.
"It is unlikely there will be adequate redress for investors until such time as Link agrees to settle the investors' claims or a court judgment is handed down."
RGL Management, which has formally launched legal action against Hargreaves Lansdown (HL) for continuing to recommend Woodford Equity Income to its clients right up until its suspension in June 2019 - even though its analysts raised concerns in 2017 - also criticised the City watchdog.
"While it is disappointing, we are not surprised that the FCA is dragging its feet," said James Hayward, CEO of RGL Management.
"But the message to investors remains very clear: compensation will only be forthcoming by seeking legal redress."
Woodford Equity fund (WEIF) timeline
June 2014 WEIF launched
May 2019 Illiquid holdings in WEIF to be cut to under 10%, Woodford confirms
3 June 2019 WEIF suspended
12 June 2019 Hargreaves Lansdown sought by Treasury Select Committee to explain Woodford relationship
August 2019 FCA launches ACD probe; Woodford refuses to reveals top 10 holdings
October 2019 WEIF wound up; Link sacks Woodford
January 2020 BlackRock and Park Hill take on WEIF liquidation
February 2021 Woodford suggests Jersey return, but island's regulator challenges idea
March 2021 RGL Management takes legal action against Hargreaves Lansdown and Link
4 May 2021 Woodford sets up in Cayman Islands, but does not apply to manage money