Woodford's return and the SM&CR

This morning, various newspapers reported that Neil Woodford, the founder and Chief Investment Officer of Woodford Investment Management, is making a comeback to the investment industry.

Of course, many will know that Woodford Investment Management failed spectacularly in 2019, costing investors close to a £1Bn loss by some estimates.

The root cause of Woodford Investment Management's failure appears to have been a fundamental failure to understand and manage liquidity risk. In fact, by designing funds that hold illiquid assets in open-ended funds that allow for daily dealing, a high level of inherent liquidity risk is designed. The then governor of the Bank of England, Mark Carney, recognised this design problem, describing these funds as "built on a lie".

So, if the reports are correct and Neil Woodford is returning to the Investment industry what does this tell us about the Senior Managers & Certification Regime (SM&CR) and the broader drive by regulators (FCA & PRA) and government to improve the culture of the UK Financial Services industry?

If Neil Woodford is allowed to return to the investment industry in a regulated capacity, this would completely undermine the Senior Managers & Certification Regime's credibility and call into question the commitment of regulators and government to drive a culture change within the UK Financial Services industry.

Post the collapse of Woodford Investment Management's collapse city grandee and former city minister, Paul Myners said, "The most profound implications of the Woodford crisis have been brushed under the carpet,"

Is the Senior Managers & Certification Regime, and the drive to change the culture in the financial services industry about to go the same way?