Fine expected

Treasury pressure may hasten Woodford payouts

Neil Woodford
Former star stock picker Neil Woodford

Treasury intervention may have helped speed up compensation to investors following the collapse of the Woodford Equity Income Fund, it has been claimed.

An adviser to the former investment star Neil Woodford faces a fine and an order to pay up to £306 million to those who lost out when it collapsed in 2019

Link Fund Solutions, which was the authorised corporate director to the £3 billion fund, was responsible for “misconduct” and failings in managing its liquidity, the Financial Conduct Authority said in an initial assessment.

Link Group, the Australian parent company of Link Fund Solutions, today released a statement saying its UK subsidiary Link Fund Solutions “does not agree with the FCA’s view” and it will challenge any Woodford penalty the FCA issues against it through its regulatory decisions committee and “further through the upper tribunal”.

Link Group believes any liabilities relating to Woodford are confined to Link Fund Solutions and not the parent company.

The FCA said that it was investigating “multiple parties” in connection with the scandal, which left more than 300,000 retail investors nursing heavy losses.

Last night’s statement, which emerged because Link Group is on the receiving end of a takeover bid from a Canadian software group, Dye & Durham, was the first preliminary finding of wrongdoing by anyone after the fund collapsed in 2019. The regulator stressed that it was not a “final decision” and LFS could challenge its findings.

Woodford attracted more than £10 billion from retail investors who were impressed by his stock-picking record. But it began to unravel after he switched focus from liquid blue-chip stocks to higher-risk unlisted equities. As investors began requesting redemptions he was unable to raise the cash. Equity Income Fund was suspended and put into liquidation.

The regulator said last night that it was “likely to seek to require LFS to pay a financial penalty and/or consumer redress”, which may be up to £306 million.

Ryan Hughes, head of investment partnerships at AJ Bell said:” “This is the first sign that the investigation into the collapse of the fund is perhaps coming closer to completion, however, the FCA has made it clear that other parties remain under investigation and that Link could appeal any penalty.

“How any payment would be made to impacted investors is as yet unclear and no doubt the FCA will want to complete its wider investigation first.

“There will likely be further developments particularly given the breadth of the investigation but this news may be a sign that pressure from the Treasury earlier in the year has finally sped things up. Investors who have waited so patiently will be hopeful that some form of financial redress may be forthcoming and they can begin to draw a line under this sorry saga.”

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