By Huw Jones
LONDON (Reuters) - Managers at Neil Woodford's suspended flagship fund were using "flawed" European Union rules to the full, Financial Conduct Authority Chief Executive Andrew Bailey said on Tuesday as he faced questions over the British regulator's role.
"They were using the rules to the full and they were not telling us they were doing that," Bailey told parliament's Treasury Select Committee.
Retail investors were left unable to get their cash out of the fund run by Woodford, one of Britain's most high-profile money managers, after it suspended withdrawals in early June following a rise in redemptions.
Bailey told lawmakers it was right to suspend the fund, but this would have been done earlier if the "flawed" European Union rules for funds were based on principles.
The FCA has opened a formal investigation into events surrounding the suspension and the listing of some of the funds' assets on a stock exchange in Guernsey.
The Woodford fund was worth around 10 billion pounds ($12.8 billion) at its peak in 2017, but has fallen in value to about 3.5 billion pounds, mainly due to redemptions, Bailey said.
It was "not right" to suggest that Link, which has responsibility for the management of the suspended Woodford fund, was any worse than other authorized corporate directors in ensuring asset managers comply with rules, Bailey said.
The FCA will also look at the role of Northern Trust (NASDAQ:NTRS), the Woodford fund's depositary.
"Suspension is an important tool, it should not be demonized," Bailey said.