The pandemic has produced some of the fastest turnarounds in history. Pharma companies Pfizer and Astrazeneca reduced the vaccine development cycle from a decade to less than a year.
And City traders quickly learned that it wasn’t necessary to be in Canary Wharf to drive markets to commanding heights. Commercial transformation to digital has been remarkable.
What a pity then, that the serially underperforming City regulator, the Financial Conduct Authority (FCA), finds life so hard.
It should be no surprise to the City watchdog the Financial Conduct Authority that up to 500,000 Woodford investors, an estimated £1bn down on their savings, want answers
It argues, in defence of its tortoise-like probe into the failure of Neil Woodford’s investment empire, that Covid made it difficult to access documents and witnesses.
That is not wholly convincing. The first nine months of its inquiry, announced by former chief executive Andrew Bailey in June 2019, took place before anyone outside an infectious disease lab had heard of coronavirus.
Covid could have speeded up access to digital documents and witnesses could have been contacted more easily using Zoom or other, more secure, sites.
It should be no surprise to the FCA that up to 500,000 Woodford investors, an estimated £1billion down on their savings, want answers.
The response from the FCA’s top enforcement official is obfuscation – Mark Steward argues that any comment about the scope of the investigation is just speculation.
Bailey’s testimony to the Commons in 2019, which referenced Woodford’s authorised manager Link and the Guernsey stock exchange, offered some clues.
If one adds to this cast the Woodford group custodian, Northern Trust, and its most active marketing instrument, Hargreaves Lansdown, many significant entities in the fund’s chain of operation already are covered.
Claiming there are legal reasons for keeping the names of main targets private, when they already are in the public domain, is not convincing.
As with all regulatory probes you are never quite sure where they will lead. The decision by Link to sell £205million of Woodford biotechnology stocks to Acacia Research in June 2020 raised eyebrows when the buyer rapidly flipped some of the assets, booking an early £56million of profits.
Acacia subsequently has engaged Woodford as an adviser and could back his new venture if it gets off the ground.
Among the investors in Acacia are activist Jeff Smith as well as a US division of Invesco, the second-largest shareholder with a 5 per cent stake. It was at UK-offshoot Invesco Perpetual that Woodford earned his reputation as among the City’s shrewdest investors.
The FCA’s caution that Woodford’s proposed entity, WCM Partners, would need to apply for permission before commencing any regulated business in the UK ought to be superfluous.
It is a great curiosity, and a hole in the protections afforded to savers, that a person at the centre of an FCA investigation can still be authorised.
If they were working for the police or most commercial organisations they would be suspended.
The gentle idea that the FCA would share information with the Jersey Financial Services Commission rather than tell it to not go near Woodford, WCM or any of their associates with a bargepole is diplomatic nicety.
All it does is remind everyone that Crown dependencies offer an easy route for financiers seeking to escape intense scrutiny of their business and tax affairs.
The FCA is not without wins. Under the leadership of Andrew Bailey, now Governor of the Bank of England, it rooted out the evils of payday lenders and the usurious interest rates charged to the most vulnerable people in society. It also has had some success in identifying and clamping down on insider traders who might have gone unpunished in the past.
As was learned from Dame Elizabeth Gloster’s report into the collapse of London Capital & Finance, enforcement is very hit and miss.
Red flags were not raised about the mini-bond company even though 600 tip-offs were tracked back to the subsequently reorganised call centre. It is this raw recent history that casts doubts on the FCA’s forensic skills.
One cannot but think that the best way forward for the Woodford probe would be for new FCA chief executive, Nikhil Rathi, to hand the Woodford material collected so far to a judge or a commercial QC. The FCA’s own enforcers look too slow and timid to be trusted any longer with such a far-reaching investigation.
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