The Financial Conduct Authority (FCA) “has failed, and is still failing” investors who were affected by the Woodford scandal, according to a group of MPs.
In a draft letter to be sent to the new City minister, Bim Afolami, the Personal Banking and Fairer Financial Services All-Party Parliamentary Group slammed the City regulator’s handling of the Woodford scandal.
“We wish to alert you to very serious concerns that the regulator has failed, and is still failing, in its responsibility to deliver appropriate consumer protection,” the letter said.
The letter suggests that there should be a judge-led inquiry into the regulator’s handling of the Woodford affair.
In particular, it raised concerns about the proposed redress scheme for the affected investors, saying the FCA “materially understates the true extent of the sums lost”.
In April, the City watchdog announced that Woodford’s former fund manager Link Fund Solutions had agreed to repay £235m to investors whose cash was trapped in the fund when it imploded in 2019.
The FCA said the redress scheme will ensure that investors receive 77p in the pound. It has encouraged investors to back the scheme.
But to reach the 77p figure, the FCA focused on the extra losses suffered by gated investors on illiquid investments compared with clients who exited immediately before withdrawals were blocked.
There is no redress for the remaining £752m capital loss suffered on selling liquid and illiquid assets before gating.
“Losses are being narrowly measured by the FCA against the suspended balance of £3.6bn, when in fact they need to be seen against the losses investors have incurred since failures came to a head in late 2017/early 2018, if not before,” the letter said.
“Investors are likely to assume they would be receiving 77 pence for every pound they have lost since the WEIF was suspended, or in total – in fact, the redress is likely to be between four and six pence in the pound on the former measure,” it continued.
Investors are currently deciding whether or not to accept the redress scheme, with the ballot closing on 4 December.
An FCA spokesperson said: “The proposed redress reflects the loss caused by LFS’ failure to comply the FCA’s Principles. It does not, nor is it intended to, reflect any losses caused by a deterioration in the performance of the underlying investments in the Fund.
“As we have made clear, this redress scheme offers the quickest route for redress for the vast majority of people. Payouts through other means such as litigation or the FSCS are not guaranteed and will likely take longer to achieve,” they continued.