FCA said: "Had Link properly calculated the liquidity in the WEIF, the true scale of the liquidity problem would have been known.
“Link was aware that WEIF’s liquidity was deteriorating throughout the relevant period, but did not effectively communicate these problems to WIM; and, insofar as Link did communicate them, it did not ensure that they were acted upon.”
A section 166 skilled persons report, issued on October 19 2018, found that Link used inappropriate participation rates for its liquidity monitoring, including of WEIF, but Link took no action to remediate the position.
The FCA also criticised Link for using an incorrect data source for its liquidity calculations.
Responding to the final notice, a spokesperson for Link Fund Solutions Limited (LFSL) says: “As we have previously stated, LFSL entered into a conditional settlement agreement with the FCA and Link Group expressly on the basis that there is no admission of liability.
"If the scheme had not been approved, LFSL would have challenged the FCA's findings and defended itself against any claims made against it by scheme investors.
"We are pleased the scheme has become effective and the initial payment has now been made to scheme investors. We have always believed the scheme was the best option to provide investors with a substantial level of redress.”
Ben Yearsley, director at Fairview Investing, says if Link had concerns, it should have acted on them more forcefully.
Yearsley adds: "I’m not saying I foresaw what was to happen, but I sold the fund in [around] November 2017 as the fund was no longer the income fund I wanted and I was concerned about the level of unquoted holdings.
"I didn’t expect the eventual outcome, but if I acted surely an ACD with far more responsibility should have."
In the FCA warning notice against Woodford, the regulator accused him of having a “defective and unreasonably narrow” understanding of his responsibilities for managing his fund and failing to ensure the fund had an appropriate liquidity profile.
In response, Woodford’s lawyers say the fund's liquidity framework was Link's responsibility and vow to challenged the findings.
The statement from WilmerHale and BCLP, legal counsel to Woodford Investment Management and Neil Woodford, says: "As the delegated investment manager, WIM was required to manage the fund in accordance with both the liquidity framework and all the other portfolio constraints set by Link.
"Central to the failings alleged against WIM and Mr Woodford is the FCA’s claim that the framework used to measure and monitor the fund’s liquidity risk and the corresponding parameters of the fund’s liquidity were not appropriate.
"Importantly, that framework and its parameters were set by Link, one of the most experienced ACDs in the industry.
