Woodford savers seeking answers as watchdog pushes for £300m payout

Three years after savers in Neil Woodford’s flagship fund were locked out of their nest eggs, they’re starting to get answers.

The city watchdog said this week it was likely Link, the company responsible for overseeing Woodford’s management of his funds, would have to pay a fine of up to £306 million.

This may seem like a small fee to investors who have lost around £1bn since the Woodford Equity Income Fund (WEIF) was closed by Link in 2019.

The fund was frozen after a flood of investors tried to get their money out of it following a string of poor performances on behalf of Woodford.

Of the £3.7bn in the fund, investors have received £2.5bn. There is £118.5million still tied up in assets yet to be sold.

The remaining £1 billion disappeared.

Here we examine some of the parties involved and whether they can be pursued. . .

Neil Woodford

While it was Woodford himself who created a problem for investors, putting too much of their money into risky, illiquid stocks that couldn’t be sold in a hurry, there is little chance for savers to attack him directly.

It was Link, rather than Woodford, who had a duty to investors – a distinction that became increasingly frustrating as victims watched the 62-year-old renovate his multi-million pound holiday home in Devon as they worked through their losses.

An investor-led lawsuit against the fallen fund manager seems unlikely, but he and his key associates have come under scrutiny from the FCA.

Three years after the start of this investigation, savers hope that the watchdog will soon announce the results and fine the fallen fund manager.

CLUTCH

Given that Link was responsible for overseeing Woodford’s management of WEIF on behalf of savers, it’s perhaps unsurprising that it was first in the line of fire.

Now part of Australia-listed Link Group, but previously part of outsourcer Capita, the company had previously been forced to pay out £32m and £66m to investors involved in the Arch Cru and Connaught fund debacles.

After paying close attention to the Financial Conduct Authority’s (FCA) investigation into the Woodford scandal, it is likely to be fined £306 million – but split among around 300,000 investors, it won’t be much.

Link is also being prosecuted by law firms Leigh Day and Harcus Parker, who have joined forces on behalf of approximately 13,000 WEIF investors to sue Link.

Meriel Hodgson-Teall, attorney at Leigh Day, said the fine proposed by the FCA was “not nearly enough to offset the many thousands who have suffered massive and life-changing financial losses from investing in this fund.”

The attorneys allege Link failed in his obligations to investors that led to the fund’s suspension and violated FCA guidelines.

Savers can still join the cause. But Hodgson-Teall warned the FCA may not allow them to claim part of the £306 million if they also hope for legal compensation.

The FCA has yet to confirm the details of Link’s recovery package, but Woodford victims could be left with the tough decision to take the money the FCA is borrowing from Link or take the company to court in the hopes of getting a refund. higher reward -out.

Hargreaves Lansdown

The UK’s largest investment platform also drew ire during the Woodford debacle as it continued to recommend WEIF until the fund’s suspension.

Savers who relied on Hargreaves Lansdown’s (HL) Wealth 50 best-buy list for advice were outraged when WEIF shut down.

Just a month earlier, HL’s then-investigator Mark Dampier predicted that beleaguered Woodford would turn a corner. Dampier has since retired.

HL is also a target of the FCA’s investigation, although the regulator has not yet announced whether it plans to punish HL for having Link.

Boss Chris Hill apologized to clients, but HL is still facing a lawsuit filed by litigation firm RGL Management, which works with attorneys to build a case on behalf of clients.

The Mail understands that RGL will file a claim in a few weeks, which will also target Link.

Unfortunately, savers are unlikely to be able to file multiple lawsuits, so they’ll have to choose between RGL and Leigh Day/Harcus Parker.

Northern Trust

A lesser-known party that became embroiled in the Woodford disaster was Northern Trust (NT), the so-called custodian of WEIF.

In the same way Link was supposed to control Woodford, NT was charged with keeping an eye on Link.

Questions arose as to whether NT challenged Link over Woodford’s steady accumulation of hard-to-sell stock. Again, it is up to the FCA’s investigation to determine whether NT has gone wrong.

Guernsey Stock Exchange

The International Stock Exchange (TISE), an obscure stock market that operates in Guernsey, came into the spotlight after Woodford used it to list WEIF shares.

Woodford had acquired several early-stage companies that were not listed on the stock exchange – a risky venture because these companies are more difficult to sell quickly and have fewer governance requirements.

For this reason, the FCA rules state that they may only make up 10 percent of plan assets. But Woodford found himself repeatedly breaking this limit. Rather than lose the bet, he put them on TISE in a cynical attempt to evade FCA rules.

TISE was criticized by some industry insiders for not checking Woodford further.

The exchange claimed it had done nothing wrong and accused the FCA of not acting fast enough when it reported concerns.

It could play a role in the FCA investigation, although Guernsey’s regulator – the Guernsey Financial Services Commission (GFSC) – should lead any investigation. The GFSC declined to comment.