The regulator said that Mr Woodford had a "defective and unreasonably narrow" understanding of his responsibilities for managing liquidity risks.

It also said that he and Woodford Investment Management failed to ensure that the Woodford Equity Income Fund's liquidity risk framework was appropriate, to respond appropriately to the ongoing deterioration in the fund's liquidity and to maintain a reasonable liquidity profile for the fund.

The notice issued to Neil Woodford and Woodford Investment Management on 19 February can be read on the FCA website.

The warning notices are not the FCA's final decisions. Before making a final decision, Mr Woodford and Woodford Investment Management have the right to make representations to the Regulatory Decisions Committee.

Following the notices, Mr Woodford subsequently issued a legal statement through his lawyers saying the he would challenge the FCA's findings and accusations.

The FCA said it would detail its proposed sanctions and its full findings public “at an appropriate point.”

The regulator also set out its findings against Link Fund Solutions, the authorised corporate director of Woodford funds.

The FCA said it found that Link, “failed to act with due skill, care and diligence in its management of the Woodford Equity Income Fund.”

The FCA found that between 31 July 2018 and the fund's suspension on 3 June 2019, Link failed to manage the liquidity of the fund and also failed to properly oversee Woodford Investment Management or to sufficiently ensure that concerns about liquidity were acted on.

Therese Chambers, joint executive director of enforcement and market oversight, said:”Link Fund Solutions' job was to properly manage the Woodford Equity Income Fund and to protect investors' interests. Their failings led to losses for those trapped in the fund when it was suspended.

“It is right that they compensate investors for the losses that resulted from their failings and we're pleased that the scheme has started making payments.”

Those invested in the Woodford Equity Income Fund when it was suspended are starting to receive a share of a £230m redress scheme, which was approved by the High Court in February.

Investors have been waiting for five years for the redress scheme after the fund failed in 2019.