UK watchdog hits back at critics over Woodford fund

Regulators won't step in every time they see investors losing money or the price of assets tumbling, Britain's markets watchdog said after being accused of tardiness in handling the now closed Woodford equity fund. Andrew Bailey, chief executive of the Financial Conduct Authority (FCA), said investing is inherently risky and he wanted to foster an environment where risk-taking occurs.

But in his annual speech on Thursday in the City of London financial district, Bailey also said the public needed to receive clear, meaningful disclosure on the risks they are taking, and should expect markets to work well. "We want to see more transparency in the risks of non-bank investment so that investors get useful information," he said. "That's why I have argued that there needs to be reform in the UCITS framework," he added, referring to EU mutual fund rules.

High-profile stockpicker Neil Woodford was required to comply with these rules in the operation of his equity fund but breached them twice. Bailey, a candidate to replace Mark Carney as Bank of England governor in January, said the FCA was aware of the need to balance suitable investor protection and supporting the economy.

"We will always seek to act to strike this balance and in doing so we may rarely appear popular, but it is a balance that has to be struck," Bailey said. The Woodford fund promised daily redemptions but was suspended in June because it was unable to sell assets fast enough to raise cash to give back to investors.

The FCA has opened an investigation into the Woodford debacle that has trapped thousands of investors. Bailey has described the UCITS rules as "flawed". The watchdog and the Bank of England will in December give an update on the better matching of how easy it is to sell assets in a fund with the redemption terms offered. Britain's departure from the European Union could help its regulators tweak the UCITS rules that have been put into UK law as part of Brexit preparations.