On Tuesday, the UK’s financial regulator, the Financial Conduct Authority (FCA) provided an update regarding the status of its investigation into the collapse of the Woodford Equity Income Fund.
The statement from the FCA gave a clear indication that it considers Link did breach its duties regarding the Woodford Equity Income Fund and that it is likely to seek to require Link to pay a financial penalty and/or consumer redress, which could total “up to £306 million”.
This announcement from the FCA was prompted by the proposed acquisition of Link Administration Holdings Limited (Link Group), the ultimate parent company for Link Fund Solutions Limited (Link, the Defendant in the claims Leigh Day is bringing), by Dye & Durham Limited. The FCA has to give its approval before a takeover can go ahead.
It is astonishing that it has taken a takeover bid of Link Group for the FCA to give this indication that it believes Link was at fault.
Through Leigh Day’s investigation into the collapse of the fund, we had already reached the same conclusion, that Link failed to properly manage the liquidity of the fund. This is a central allegation in the claims we are bringing on behalf of our clients, the investors in the fund. The fact that the FCA is indicating the same reinforces the allegations we are making on behalf of our clients. It underscores that something very wrong happened with this fund, which has caused ordinary savers to suffer huge and life changing financial losses.
What is not clear is what will happen next: whether the FCA will impose a fine or require a redress scheme to be set up to compensate investors, and if yes, when and how this will actually happen. The Link Group has published a statement emphasising that this is not a final decision from the FCA, and that Link Fund Solutions intends to “explore all options”, including challenging and appealing any decision the FCA does make, as it says Link “does not agree with the FCA's view.” It seems that Link is going to keep trying to avoid its responsibilities towards the hard-working Woodford investors.
Given this, a redress scheme is far from a certainty, and if one is set up, it could still be many months, if not years, away.
Investors have already been waiting years for the FCA to conclude its enforcement investigation into LFS, which was responsible for managing the Woodford fund, including its liquidity, in June 2019.
Furthermore, the reported £306 million in relation to 'any restitution and or redress payments that the FCA may levy on LFS in relation to its management of the LF Woodford Equity and Income Fund’ is nowhere near enough to compensate the many thousands of people who suffered huge and life changing financial losses investing in this fund.
Leigh Day calculates that, if all of the individuals who suffered losses as a result of investing in this fund signed up to the claims proceeding through the courts, the court claims could be in the billions.
The FCA’s announcement says this potential redress figure of £306m "does not reflect any amount which may be owed to anyone else, including members of the fund" and is "based on misconduct rather than losses caused by fluctuations in the market value of price of investments". This will be of little comfort to the thousands of investors who lost out from the fund’s collapse, and who deserve a swift resolution.
If a redress scheme were to be established, this would be separate to the claims which are ongoing through the courts, including those which Leigh Day is bringing on behalf of our clients.
Leigh Day is continuing to work tirelessly on the group action, which seeks to compensate investors fully for the losses they have sustained.
The next step in the group action is a hearing for the Claimants’ application for a Group Litigation Order which is now scheduled for December 2022.
15 September 2022
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