As published on international-adviser.com, Monday 8 March, 2021.
Neil Woodford’s dramatic comeback has been described as “on the rocks” after the Jersey Financial Services Commission (JFSC) warned the island will not be used as a “back door” for the disgraced manager to skirt UK regulation and relaunch his career.
In an interview with the Financial Times, JFSC director-general Martin Moloney cautioned that attempts to exploit the island’s close connections with the UK via “regulatory arbitrage” would not succeed.
Woodford revealed plans to revive his investment career by launching a Jersey-based business called WCM Partners in a stunning interview with the Telegraph last month.
His announcement came just 16 months after the implosion of his fund boutique Woodford Investment Management and while a Financial Conduct Authority (FCA) investigation into the collapse of the Woodford Equity Income fund is still ongoing.
“Anyone who gets off the plane thinking that Jersey is a soft touch has wasted the price of the ticket,” Moloney told the FT. “Jersey is not the place to come if you are trying to get around UK regulation, or any other regulation for that matter.”
Adrian Lowcock, Willis Owen head of personal investing, said the fighting words from the Jersey regulator show that Woodford’s dramatic return to investment management is “far from certain”.
“While not specifically naming Woodford, the tough talk from the Jersey regulator which is refusing to be a ‘back door’ to the UK market makes it clear that a relaunch via the region is by no means going to be straight forward, with his comeback seemingly on the rocks,” Lowcock said.
Fundscape chief executive Bella Caridade-Ferreira took the Jersey regulator’s warning as a clear sign Woodford’s comeback attempt has been “scuppered”.
“I think the JFSC has been pretty clear on this,” Caridade-Ferreira said. “He [Woodford] is toxic. No one’s going to touch him now.”
AJ Bell head of active portfolios Ryan Hughes said with the financial regulators catching a lot of flak for their handling of the Woodford saga over the past two years, it is unsurprising that the JFSC is “wanting to try and regain a bit of ground by putting out a strong statement”.
“The last thing any regular wants is to be seen as a soft touch and it’s clear that Martin Moloney wants to ensure that Jersey is seen by all as having strong and robust governance,” Hughes said.
Gbi2 managing director Graham Bentley said the fact Woodford announced his comeback to the Telegraph “without adding the necessary rider ‘subject to regulatory approval’” has clearly “touched a sensitive nerve”.
“He [Woodford] has left the impression authorisation is a formality. By extension that implies Jersey authorisation is less stringent,” Bentley said. “That has touched a sensitive nerve, the perception that the Channel Islands is a haven for tax-dodging ne’er-do-wells.”
According to the FT, Woodford has yet to submit an authorisation application in Jersey in the three weeks since unveiling his business plans to the Telegraph.
SCM direct co-founder Gina Miller said the Jersey regulator’s warning shot to Woodford reflects even more poorly on the FCA which has still not held anyone account to for the collapse of his fund.
Both the Jersey and Guernsey regulators have been more “decisive” at keeping on top of Woodford’s activities, Miller said.
The International Stock Exchange suspended several of Woodford’s former holdings that he tried to quietly list on Guernsey’s main stock market in order to bring down his unquoted exposure months before his equity income fund suspended. The FCA took over a month to respond to TISE’s concerns about the stock listings.
“Both the Guernsey and Jersey regulators are showing up our UK regulator,” Miller said. “It’s not just their rhetoric, it is the reality of their decisive actions compared to the FCA speeding through the original authorisation of Woodford Investment Management.”
Miller believes that Woodford’s new venture should not be authorised until an independent investigation into the Woodford scandal “which includes the role of the FCA” is concluded.
The FCA broke its silence on Woodford’s comeback nearly three days after his interview with the Telegraph went live stating that he would need to apply for permission before commencing any activity in the UK and vowing to work with JFSC to share information on any applications made in their respective jurisdictions.
Meanwhile calls for the watchdog to conclude its investigation into Woodford Equity Income have ramped up, with Treasury Committee chair Mel Stride demanding the FCA set a timescale for its now 18 month investigation. The FCA has said it will update MPs on 31 May 2021.