Following the recent news that top stock picker Neil Woodford has suspended trading in his largest fund, we thought it may be useful to provide some clarity as to what this means for IFAs and their clients.
With the prior agreement of the depositary, the authorised fund manager may, and if the depositary so requires must, without delay, temporarily suspend the issue, cancellation, sale and redemption of units in an authorised fund, where due to exceptional circumstances it is in the interest of all the unitholders in the authorised fund.
The fund manager and the depositary must ensure that the suspension is only allowed to continue for as long as it is justified, having regard to the interests of the unitholders. The fund manager or depositary is required to inform the FCA as soon as is practicable and provide written confirmation of the suspension and the reasons for it.
The fund manager is also responsible for ensuring that a notification of suspension is made to unitholders of the authorised fund as soon as practicable after suspension commences. This must draw particular attention to the exceptional circumstances which resulted in the suspension including, if known, its likely duration.
During a suspension, the authorised fund manager should inform any person who requests a sale or redemption of units that all dealings in units have been suspended and that that person has the option to withdraw the request during the period of suspension or have the request executed at the first opportunity after the suspension ends.
The suspension must cease as soon as practicable. The fund manager and depositary must formally review the suspension at least every 28 days and inform the FCA of the results of this review and any change.