Friday 24 July 2020 2:04 pm

FCA launches probe into Woodford depositary Northern Trust

The City regulator has launched an investigation into Neil Woodford’s depositary Northern Trust over the events that led to the gating of the flagship Equity Income fund last June.

The investigation was launched in recent months following an ongoing probe into Link Fund Solutions, the firm supervising the Woodford Equity Income Fund.

Read more: Acacia Research offloads bargain Woodford stocks

Last June the fund was suspended after becoming overwhelmed by investor withdrawal requests, leading to the investment industry’s biggest crisis in years.  The suspension eventually led to Woodford shuttering the business in October.

The fund is now being liquidated with assets being sold off to help investors recover some of their losses.

The probe into depositary Northern Trust has been ongoing for months, Wealth Manager first reported. A depositary essentially keeps the authorised corporate director (ACD) – in this case Link – in check.

The regulator’s fund governance handbook states the depositary must ensure ACDs and fund managers are sticking to the rules in areas like unit pricing, dealing, borrowing restrictions and portfolio valuation.

Wealth Manager reported that the FCA is looking at whether Northern Trust challenged the build-up of illiquid holdings in Woodford’s fund, which breached the 10 per cent limit on unquoted stocks. At one point it reached 18 per cent.

In January, Link Fund said investors trapped in WEI face charges of £10m from the wind-up of the fund. It detailed costs of £5m in January accrued since mid-October when it sacked Woodford. Provision for a further £5.3m of costs has also been made. 

Read more: Neil Woodford one year on: How the star stock picker fell from grace

Around £2.1bn was handed back to the 300,000 investors locked in the fund in January, at a payout of 46p to 57p per share compared to its 100p launch price. 

However there is still £500m of Equity Income fund assets stuck in illiquid companies. Given the coronavirus crisis there is unlikely to be much progress made.

The FCA and Northern Trust both declined to comment.