U.K. Regulator Tries to Prevent Repeat of Crisis That Hit Funds Run By Woodford

(Bloomberg) -- The U.K.’s top markets regulator heaped more pressure on the fund management industry to improve oversight of liquidity as it looks to prevent a recurrence of the crises that struck funds run by Neil Woodford and H2O Asset Management.

In a letter to the chairs of fund managers, the Financial Conduct Authority called for the executives and board members themselves to take more responsibility for ensuring funds have adequate resources to easily meet redemptions without having to dump investments in a rush. The board members shouldn’t leave the task only to portfolio managers.

The letter comes as the Bank of England and FCA step up warnings about mutual funds that allow daily withdrawals while investing in assets that can be hard to sell on short notice. Bank of England Governor Mark Carney has said such funds are “built on a lie.”

The FCA recently adopted rules for funds that invest in hard-to-sell property assets. It said in the letter on Monday that all funds ought to consider following them and ahead of a September deadline.

Nick Miller, head of the FCA’s asset management department, said in the letter that fund executives should consider the actual liquidity in an underlying asset and not just whether it’s technically admitted for trading on an exchange or other market.

Neil Woodford’s funds held investments in unquoted securities that were listed on a stock exchange in Guernsey, according to the FCA which has an open investigation into the scandal at the fund company.

To contact the reporter on this story: Silla Brush in London at sbrush@bloomberg.net

To contact the editors responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net, Chris Bourke, Patrick Henry

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