What is an ACD?
I don’t know much about retail funds, so I’ve had to read up about what an ACD is. If you google “authorised corporate director” the first two definitions are from Gallium, a firm very familiar to me – mainly from the cease and desist letters they have sent to me over the years. Here’s their definition of an ACD
A corporate body and an authorised person given powers and duties under the Financial Conduct Authority (“FCA”) regulations to operate an Open Ended Investment Company (“OEIC”).
I came accross Gallium – first in 2015 when they were involved with a number of shady funds within workplace pensions
then when Al Rush and I found they were the ACDs to Strand and Vega – the principal investment funds used by Active Wealth Management – of Port Talbot fame.
Referring to Gallium’s website
The responsibilities of an OEIC’s ACD are set out in the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulation 1996 and the FCA’s Collective Investment Scheme Handbook. These include dealing with the day to day operation of the company. The ACD’s responsibilities include managing the company’s investments, buying and selling own shares on demand, and ensuring accurate pricing of shares at net asset value.
An ACD must be authorised by the FCA.
ACDs and Woodford
But the work an ACD can do goes way beyond operations. We are now finding out that the ACD behind Neil Woodford’s World Equity Income fund – Link – was involved in all kinds of things – including the listing of illiquid investments on the Guernsey Stock Exchange.
Just like Gallium’s associations with Strand and Vega , Link has its own skeletons. In 2017 it bought Capita Financial Management (CFM). CFM had been authorised corporate director (ACD) for both Arch Cru in 2009 and Connaught Income in 2012, for which it was fined £66m and publicly criticised. Connaught Income went into liquidation, losing investors £118m.
For a very good report on the known facts surrounding Woodford’s illiquid investments, read this by Daniel Grote.
“in the eyes of the FCA, Link is the fund manager. Neil Woodford’s name may be emblazoned across his company and funds, but technically, Link is in charge of Woodford Equity Income, and has delegated investment management to Woodford”.
Who do ACD’s protect?
The ACD is in place to protect the investor in a fund and is supervised by the FCA. When it fails in its duties, the FCA can intervene. Judging by this letter from FCA CEO to Nicky Morgan of the Treasury Select Committee, the FCA are intervening in Link’s management of Woodford.
But ACD’s persist – even when the funds don’t. Consumers generally need to find redress through FSCS. FSCS is funded by a general levy so the FCA is also protecting FSCS and by extension levy payers.
The impact of the collapse of Arch Cru, Connaught and Strand on FSCS has been substantial. I wonder how little ACDs are in the public eye and why they are not more accountable both to fund investors and to those who fund FSCS.
Steelworkers who have invested in Vega , now openly talk of their fund as Gallium, thanks to the help they have received by Al Rush and Phillipa Hannon, but for most investors, the shadowy role of the ACD is unknown.
Let’s hope that the investigation launched by the FCA into Woodford, can help investors get a clearer understanding of this very untransparant area of fund management so that consumers can have confidence in the role of ACDs.