Financial Conduct Authority boss Andrew Bailey has accused beleaguered fund manager Neil Woodford of “following the letter, but not the spirit” of the UK regulator’s rules following the June suspension of the Equity Income fund.
Bailey was speaking at the UK financial watchdog’s annual public meeting in the City of London this week.
Last month, Bailey claimed shortcomings in EU regulations were behind the fallout involving Woodford’s flagship €4.1bn fund. The European Commission responded that poor oversight by the FCA was behind the debacle.
A section of Bailey’s speech focused on box-ticking was the only time Woodford was mentioned.
He said: “Rules are a crucial mechanism for delivering outcomes but can also be interpreted so rigidly as to become a box-ticking exercise.
“This is a lesson we want to see reflected in firm behaviour – any organisation that prioritises being within the rules over doing the right thing, will not stand up to scrutiny for long.
“We view incidents like the Woodford affair as an example of this – where firms are following the letter, but not the spirit, of the rules. It raises questions about the rules themselves.”
In April, Woodford listed a trio of unquoted stocks, including Industrial Heat and Ombu, on the Guernsey Stock Exchange as a means of staying within the FCA’s rules on unquoted companies.
Woodford did not want to respond to Bailey’s remarks when contacted by sister publication Portfolio Adviser.
Brexit connection
Bailey then transitioned into talking about Brexit stating it offered a chance to examine the issue of outcomes versus rules.
He said: “While the post-Brexit future is unclear, it is fair to say that there are aspects of our regulatory approach that may have developed differently had they done so unilaterally.
“So, while the FCA takes no position on the substance of Brexit itself, we are using the opportunity of the UK’s exit to consider the future of conduct regulation – and how best to deliver in the public interest in this changing context.”
The FCA currently has 320 staff working on the UK’s exit from the European Union in some capacity and this was as high as 450 when it was focused on no deal contingency planning in the lead up to 29 March 2019, the initial Article 50 deadline for Brexit.
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