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UPDATE 2-Woodford under fresh fire as Fidelity curbs investment in second fund

By Carolyn Cohn and Muvija M

(Adds Woodford, BOE, PIMFA, Gina Miller comments, AUM, share moves)

By Carolyn Cohn and Muvija M

June 18 (Reuters) - British money manager Neil Woodford faced further pressure on Tuesday after retail platform Fidelity International stopped its customers from making new investments in one of his smaller funds.

Woodford, one of Britain's best-known fund managers, suspended the 3.7 billion pound ($4.6 billion) LF Woodford Equity Income fund on June 3 due to a rise in redemption requests, leaving investors unsure about when they will get their money back.

This has put Woodford's business under scrutiny by regulators and politicians, and led to outflows from the Income Focus fund, his other open-ended investment fund.

Fidelity's decision to curb new investments in the Income Focus fund is the latest setback for Woodford, after British wealth manager St James's Place ended a 3.5 billion pound investment mandate with Woodford Investment Management.

Meanwhile, investment platform Hargreaves Lansdown removed the Equity Fund, which has come under fire for investing in unlisted and illiquid stocks, from its 'Wealth 50' list and cut its exposure to the Income Focus fund.

Fidelity said in an emailed statement that its move was "in the best interest of our platform clients unless and until uncertainties are resolved," adding it was not restricting withdrawals from the fund.

It said that the restrictions were temporary and a "precautionary measure".

The Income Focus fund "doesn't have any exposure to illiquid or unquoted securities", a Woodford spokesman said in an email, adding that it contains "a combination of large, mid and small-sized companies".

The Income Focus fund's assets under management (AUM) have dropped 32% since the Equity Income fund suspension, to 325 million pounds, Morningstar data shows. Redemptions and market movements can contribute to a drop in AUM.

The suspension of Woodford's fund could become a "very big problem" if it caused investors to doubt the integrity of the financial system, Bank of England policymaker Anil Kashyap said on Tuesday.

And PIMFA, the trade association for investment managers and financial advisers, said it represented "an erosion of trust", while retail investor lobbyist Gina Miller called for an independent review into the regulator.

Woodford's only listed fund, the Woodford Patient Capital Trust, hit record lows on Tuesday, down more than 30% since the Equity Income fund suspension. It recovered ground to 55 pence by 1220 GMT, down 0.2%. ($1 = 0.7990 pounds) (Reporting by Carolyn Cohn in London and Muvija M in Bengaluru; Editing by Bernard Orr and Alexander Smith)