A Regulatory Catastrophe: The FCA and the Woodford Fund Debacle

24 August 2025 

The aftershocks of the collapse of the Woodford Equity Income Fund (WEIF), once a titan of the UK’s retail investment scene, continue to reverberate through the financial landscape.  

Six years on from the fund’s ignominious suspension, the recent levying of a £46 million fine on Neil Woodford and his firm by the Financial Conduct Authority (FCA) has done little to quell the simmering anger of hundreds of thousands of investors who saw their savings decimated.  

This protracted scandal is a damning indictment of the UK’s financial regulator, whose catalogue of failures, culminating in a disastrous fire sale of the fund’s illiquid assets, raises profound questions about the FCA’s fitness for purpose. 

This blog focuses on the FCA’s multifaceted failings in the Woodford affair, with a particular focus on the regulator’s role in the forced liquidation of the fund’s assets. It draws upon the tireless campaigning of ShareSoc, the UK Individual Shareholders Society, and the insightful commentary of financial journalists, including Emma Dunkley of the Financial Times, to argue that the regulator was not a passive bystander but an active participant in a process that crystallised substantial losses for ordinary investors. 

The Genesis of a Disaster: A Regulator Asleep at the Wheel 

The Woodford Equity Income Fund, launched to great fanfare in 2014, was built on the star power of its founder, Neil Woodford. His long and successful track record at Invesco Perpetual attracted a deluge of retail investment, with the fund’s assets under management peaking at over £10 billion.  

However, the seeds of its destruction were sown when the fund’s investment activity started to drift, veering increasingly into unlisted, illiquid and non-income-producing securities. 

This growing illiquidity was a ticking time bomb in an open-ended fund that promised daily liquidity to its investors. The FCA, the body charged with protecting these investors, had ample warning of the impending danger. Whistleblowers had raised concerns, and the fund’s increasingly unconventional portfolio was a matter of public record, but the regulator’s anaemic response was characterised by inertia. The FCA failed to take decisive action to curb the fund’s escalating risk profile, an omission that set the stage for the subsequent collapse. 

The suspension of the fund in June 2019, triggered by a wave of redemption requests that it could not meet, was the inevitable consequence of this combination of irresponsible investment management coupled with regulatory inaction. For the 300,000 investors trapped in the fund, the fund’s suspension was just the beginning of their nightmare. 

The Forced Sale: A Fire Sale Sanctioned by the FCA 

The decision to liquidate the WEIF in October 2019, driven by the fund’s administrator, Link Fund Solutions, and sanctioned by the FCA, marked a critical juncture in the saga.  

It was at this point that the regulator’s failure to protect investors morphed into an active role in the destruction of their capital. The process of winding down the fund evolved into a fire sale of its illiquid assets, with specialist buyers circling to pick up distressed assets at knockdown prices. 

One of the most egregious examples of this was the sale of a portfolio of 19 biotech stocks to the US firm Acacia Research in June 2020 for £224 million. This portfolio, which included promising companies such as Oxford Nanopore, was sold at a significant discount to its previous valuation.  

The alacrity with which Acacia was able to sell on some of these assets for a swift and substantial profit underscored the extent to which investors’ interests were being sacrificed in the name of a speedy liquidation. 

The role of PJT Park Hill, the adviser appointed to manage the sale of the illiquid assets, has also come under scrutiny. The firm charged substantial fees for its services, further eroding the value returned to investors. The entire process was conducted with a shocking lack of transparency, leaving investors in the dark as their savings were carved up and sold off for pence in the pound. 

The FCA’s role in this calamitous process was not one of a detached observer. As the regulator, it had the authority to intervene and ensure an orderly and value-maximising liquidation. Instead, it appears to have prioritised a swift and clean end to the Woodford affair, regardless of the cost to investors. Its approval of the liquidation process, knowing that it would inevitably lead to a fire sale, represents a profound betrayal of its statutory duty. 

The ShareSoc Campaign: A Voice for the Disenfranchised 

Throughout this sorry saga, ShareSoc has been a relentless and powerful voice for the dispossessed investors. The organisation has tirelessly campaigned for redress for the victims of the Woodford collapse and for fundamental reforms to the UK’s financial regulatory framework. 

ShareSoc has highlighted the regulator’s failure to act on the early warning signs of the impending crisis, its ineffectual oversight of Link Fund Solutions, and its complicity in the disastrous liquidation of the fund’s assets.  

The campaign group has argued that the compensation scheme offered to investors is woefully inadequate and fails to account for the full extent of their losses, which have been compounded by the opportunity cost of having their capital trapped in a failed fund for years. 

The campaign has also shone a light on the systemic failures of the UK’s regulatory architecture. The Woodford collapse has exposed the inherent conflicts of interest in a system where the regulator is tasked with promoting the competitiveness of the financial services industry while protecting consumers. 

A Damning Verdict: The FCA’s Culpability 

The collapse of the Woodford Equity Income Fund was a disaster with many contributing factors. The hubris of its founder, the failures of the fund’s administrator, and the inadequacies of the regulatory framework all played a part. However, the role of the Financial Conduct Authority warrants particular focus. 

From its failure to act on the danger posed by the fund’s illiquidity to its sanctioning of a liquidation that crystallised significant losses for investors, the FCA has been found wanting at every turn. The recent fines, while headline-grabbing, are a wholly inadequate response to a regulatory failure of this magnitude. 

The Woodford affair is a stain on the reputation of the UK’s financial services industry and its regulator. It is a cautionary tale of what happens when a regulator loses sight of what should be its primary duty: to protect the investing public from foreseeable and avoidable harm.  

For the hundreds of thousands of ordinary people whose financial futures have been blighted by this scandal, the pursuit of justice and meaningful regulatory reform must continue.  

The FCA has been an active participant in a financial tragedy. A full and independent inquiry into its handling of the Woodford affair is not just desirable; it is a national imperative. 

Click here for Cliff’s in-depth breakdown on LinkedIn.

Cliff Weight, member of ShareSoc and ShareSoc Education and Policy Committees, and the ShareSoc Woodford Campaign. However, Cliff writes this blog in a personal capacity, and this article reflects the opinions of its author and not necessarily those of ShareSoc.