Woodford failed to warn Hargreaves Lansdown of unquoted stocks breach
Neil Woodford failed to warn Hargreaves Lansdown that his now suspended fund twice breached an investment limit in unquoted stocks.
The fund supermarket had insisted Woodford Investment Management informed it if the equity income fund breached a 10 per cent limit. This followed concerns that the proportion of unquoted assets in the fund had increased.
Read more: Financial Conduct Authority launches probe into Woodford suspension
Woodford breached the limit in February and March last year but did not inform Hargreaves Lansdown on either occasion.
However, Woodford Investment Management said it was required to inform Hargreaves Lansdown of “month-end breaches only”. It said the two breaches were resolved before month-end.
Responding to questions from the treasury committee today Chris Hill, chief executive of Hargreaves Lansdown, said in 2017 the firm had “urged” Woodford to “address the issue” of unquoted stocks in the portfolio.
Woodford agreed to make no further investments into unquoted businesses, to reduce the early warning thresholds for existing investments and not to breach the 10 per cent level in unquoted stocks.
“We have subsequently, on 18 June 2019 in Financial Conduct Authority (FCA) chair Andrew Bailey’s response to the treasury select committee, found that Woodford twice breached this limit in February and March 2018,” he said.
“They did not inform us of this on either occasion”.
Read more: Fidelity bars clients from putting money into Woodford fund
Hargreaves Lansdown investors currently have £1.6bn tied up in the suspended Woodford equity income fund. The investment platform received £41.1m in fees from the fund since its launch in 2014.
The fund was only removed from the investment advisers “best buy” list following its suspension earlier this month, prompting questions over the close relationship between the two businesses.
A spokesperson for Woodford said: “The agreement with Hargreaves Lansdown was to inform them of any month-end breaches only. Consistent with all clients, Woodford provided month-end data for investors and at no time was there a month-end passive breach. The FCA reference to breaches in February and March 2018, relates to two inadvertent intra-month passive breaches, both resolved before month-end.”