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Role of ACDs and regulatory shortfall under scrutiny in Woodford fund suspension

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Another week and the Woodford fund suspension continues to dominate the wealth news. Octo Members Group CEO, Lee Robertson, in our accompanying interview, is not alone in feeling that the authorised corporate directors (ACD) have a lot to answer for in the debacle.

Anna Sofat (pictured), CEO, Addidi Wealth says: “I think for me the main lesson we need to pick up on this is around the regulation side.”

“With hindsight, many organisations were caught sleeping on the job and Hargreaves Lansdown in particular, bearing in mind they account for 30 per cent of the fund. Hargreaves had a duty of care to their clients and it feels as if that was ignored for commercial interests which sadly is far too common in financial services,” Sofat says.
Alan and Gina Miller, founders of SCM Direct, and notable campaigners for consumers in the investment industry, have celebrated their 10-year anniversary, calling for the Government to commission an independent root and branch review of the structure and functioning of the FCA, along the lines of last year’s Kingman Review, to end what they call ‘the dismal treatment of UK retail fund investors’.

SCM has produced a large body of research, and writes that it has: “called out failings by both the self-interested industry trade bodies and the regulator, challenged anti-consumer behaviours in respect of research costs, closet index tracking, liquidity and mispricing, hidden fees, fund labelling, and lack of investment and holdings transparency, together with numerous regulatory failings”.

Addidi’s Sofat says: “Preventing consumer harm is the regulator’s main focus and whilst this is necessary, it doesn’t actually inspire the best. At present, the top down approach is not working – the politicians just hit the regulator over the head, the regulator then tries to come down hard on the industry and the average person in street gets to pick up the bill. It would be so much more engaging and efficient if the industry adopted a fiduciary duty to improve the financial well-being of our clients as a main business driver, alongside the interests of the shareholders.”

The Millers note that in the case of the Woodford scandal, the FCA ignored calls from the Guernsey Stock Exchange and even claimed it was unaware of the decision to list assets there despite it being widely reported. These points, they say, all amount to ‘clear evidence of a systematic and widespread regulatory failure under the stewardship of the FCA’s Chief Executive, Mr Andrew Bailey’.

The Millers also comment on the statement by Nicky Morgan, chairwoman of the Treasury Select Committee, the Woodford fund saga has raised certain questions about further scrutiny of the fund management industry, including transparency, the fees charged and its regulation. News from the FCA today is that they are now investigating the Woodford fund’s investments in illiquid assets.

September sees Addidi Wealth organising its Changing Culture of Wealth Movement conference, where Sofat intends to ask like-minded businesses and individuals to bring about change from within. “People are fed up with scandal after scandal and more and more regulation,” Sofat says.
 
 

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