Concerns raised that FCA may have been asleep at wheel as fund manager slipped into crisis

MPs have asked the City regulator to publish details of its contact with Neil Woodford and raised concerns that the Financial Conduct Authority may have been asleep at the wheel as the fund manager tumbled into crisis.

The Treasury select committee wants the Financial Conduct Authority to “set out the detail of its supervisory contact” with the Woodford Equity Income Fund. It also wants to know whether the watchdog plans to launch a formal investigation of the events that led to investors being blocked from cashing out their investments and to explain “how long such a suspension should be”.

The MP and committee chair, Nicky Morgan, said in a letter to the FCA chief Andrew Bailey that the suspension of the fund “has raised significant concerns about its impact on investors and the wider regulation and supervision of funds”. Morgan said in a statement: “Questions have been raised about the FCA’s alertness to the problem.”

Last week, Woodford, one of the UK’s best-known stock-pickers, gated his flagship fund after being overwhelmed with demands from investors wanting to withdraw their cash in the wake of a series of poor market bets.

Morgan’s letter asked Bailey for a breakdown of how investment funds are regulated and whether those rules may now be changed. It also asked the FCA chief when the regulator would intervene. Woodford’s flagship fund was suspended for 28 days, with a review scheduled for the end of that period.

Morgan has also requested a timeline detailing the FCA’s contacts with Woodford’s fund as well as with authorities in Guernsey, where Woodford listed some of his private company investments. Those listings allowed Woodford to comply with EU rules that limit the proportion of unlisted investments to 10%.

An FCA spokesman confirmed that the regulator had received the letter and plans to respond.

Bailey and the FCA chair, Charles Randell, will appear in front of the Treasury select committee on 25 June.

The committee’s letter was released on Monday as Woodford refused customers’ requests to see a complete list of fund investments. Woodford has always allowed investors to see a full list of shareholdings in the funds he manages, but will disclose only the top 10 holdings in all three funds during the suspension. The firm said the move was in the best interest of investors as the firm sells down shares to realise the cash it needs to repay investors.

Woodford’s stock market-listed fund also attempted to reassure investors over its performance, despite its shares falling to record lows.

The share price of Woodford’s Patient Capital Trust Fund, which is listed on London’s FTSE 250 index, tumbled to 59p on Monday, down from 76p before Woodford gated the Equity Income Fund.

In a statement designed to calm investors’ nerves, Patient Capital Trust said: “The board is pleased with the operational progress of its portfolio companies, which the board believes continue to have the potential to deliver attractive returns, in line with the long-term mandate of the company. The operational performance of these businesses is not impacted by recent events.”

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Susan Searle, the chair of Patient Capital Trust, said: “The board is closely monitoring the situation and is engaging with its shareholders and advisers. Separately, the board is in regular dialogue with the portfolio manager. The board wishes to emphasise the long-term approach of the company and will continue to keep shareholders updated as necessary.”

Shares in Hargreaves Lansdown, which recommended and sold Woodford’s funds, were down by nearly 3% on Monday, despite news that the stockbroker is considering removing the Woodford fund from certain portfolios.

Emma Wall, head of investment analysis at Hargreaves Lansdown, said: “We constantly review our funds, but obviously special attention will be triggered by events such as a period of underperformance, change in manager or a liquidity issue such as gating.

“It would be insincere to say that this is business as usual, and we will be taking this time to consider our position. Any decision made will be communicated first with the investors in the funds affected.”

The Hargreaves Lansdown’s chief executive, Chris Hill, issued an apology to investors over the weekend after thousands of the FTSE 100 company’s clients found their money trapped following the fund’s suspension.