Neil Woodford 'defective' in running his flagship fund, UK watchdog says

Woodford had unreasonably narrow view of responsibilities - FCA

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FCA findings fundamentally misconceived - Woodford, WIM lawyers

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Timing of warning notices "questionable" - ShareSoc

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No other parties under investigation over 2019 fund failure

LONDON, April 11 (Reuters) - Neil Woodford, the former star stock picker whose flagship fund collapsed in 2019, trapping around 300,000 investors, had a "defective and unreasonably narrow" understanding of his responsibilities, Britain's markets regulator said on Thursday.

Publishing warning notices of regulatory failings by the fund manager and his Woodford Investment Management (WIM) company, the Financial Conduct Authority (FCA) said Woodford had failed to ensure sufficient liquidity and to respond appropriately as this deteriorated.

The Woodford Equity Investment Fund (WEIF) was suspended five years ago following out-sized bets on illiquid assets that left it unable to meet investor redemption requests within a stipulated four day-period.

But WilmerHale and BCLP, the law firms representing WIM and Woodford, said they would challenge the "unprecedented and fundamentally misconceived" findings.

The regulator, the fund's authorised corporate director Link Funds Solutions (LFS) and the depository - responsible for safekeeping assets and overseeing LFS - were responsible for the fund's liquidity profile, the law firms argued in a joint statement.

"It is striking that the FCA's only criticisms of Neil Woodford relate to his involvement in matters relating to the fund's liquidity framework, which was, in fact, Link's responsibility and supervised by the depositary ... and the FCA," the law firms said.

"In fact, WIM knew that the FCA had been monitoring the fund's liquidity continuously since the beginning of 2018."

The FCA, which has powers to ban and fine individuals, did not provide details about proposed sanctions at this stage. No other parties remained under investigation, it said.

"In the event that the FCA makes final decisions, it intends to make its findings public at the appropriate point," it added.

The failure of the fund sparked an FCA investigation, three investor lawsuits against LFS and one against investment platform Hargreaves Lansdown, which promoted the fund.

Publishing a separate final notice, the regulator said LFS had also failed to act with due skill and care. Between July 2018 and June 2019, it failed to manage the fund's liquidity and appreciate the scale of risk - and therefore did not update investors or the FCA appropriately, the FCA said.

Its case and lawsuits against LFS, however, have been settled after a LFS redress plan, worth up to 230 million pounds ($289 million), was approved by London's High Court in February.

WEIF investors have started to receive a share of the compensation package, the FCA said. But redress, to date, has been set at a fraction of the 1.0 billion pounds some investors and law firms were seeking.

ShareSoc, a British retail shareholder society, welcomed the FCA's findings but questioned why they had been published after investors were asked to vote on the LFS redress package last year.

"One billion pounds has been lost and nobody has gone to jail," said Cliff Weight, a ShareSoc member. ($1 = 0.7952 pounds) (Reporting by Huw Jones and Kirstin Ridley, editing by David Evans and Josie Kao)