Leigh Day has taken the first legal steps on behalf of some 4,000 investors in the defunct Woodford Equity Income fund against Link Fund Solutions which could see the authorised corporate director taken to the High Court in a matter of months.
On Friday the law firm announced it had sent its letter before action (LBA) to Link on behalf of its clients who have suffered due to the collapse of WEIF.
It follows rival law firm Harcus Parker, which in August last year issued its own so-called pre-action letter required in the UK to trigger the litigation process.
See also: Hargreaves looks set to dodge a bullet as litigators home in on Link over Woodford collapse
Leigh Day’s allegations
Leigh Day’s letter alleges that Link mismanaged the £3.6bn fund and, in particular, failed to maintain appropriate levels of liquidity. It also demonstrates that the failure of the fund was not out of the blue, but “had a long genesis and was avoidable, had Link done its job properly”.
The letter also accuses Link of breaching the Financial Conduct Authority’s 10% limit on unquoted securities the fund was permitted to hold and “massaging the holdings” so the listings appeared to remain within the FCA’s rules.
According to Leigh Day, Link and Woodford used a number of tactics to circumvent the rules, such as trades with other funds managed by Woodford, listing unquoted securities on the International Stock Exchange in Guernsey, and unquoted companies cancelling and reissuing shares held by Woodford.
Leigh Day claimed that since the fund’s suspension and the decision to wind it down, Link has undervalued its assets, aggravating the damage already done to investors, adding that “it is envisaged that investors’ losses will be in excess of the difference between money invested and proceeds ultimately recovered”.
Link given three months to respond
Link has three months to respond to the letter. If the company does not agree to compensate investors, Leigh Day said it will issue court proceedings in the High Court which could lead to a legal trial in which those involved with the Woodford fund could be called to give evidence.
Derrick Dale QC of Fountain Court will act for Leigh Day, with Teniola Onabanjo of 3VB as Counsel.
Leigh Day has secured after the event insurance and litigation funding to take the claim through to trial, meaning that its clients will not have to personally meet the costs.
“The thousands of people who invested in this fund were entitled to expect that their money was in safe hands and managed within the FCA rules. Sadly, this was not the case. Link failed to do their job and take necessary steps to protect the interests of those that had invested in the WEIF,” said Boz Michalowska on behalf of Leigh Day.
“As a result, our clients have lost hard earned savings and pensions. the LBA is the first formal step on behalf of 4,000 of our clients to recover those losses and hold those responsible to account,” she added.
The lawsuit has been endorsed by UK shareholder society, Sharesoc, which has urged investors who have lost out in the saga to join its campaign.
“It’s fantastic news that another critical milestone has been hit in Leigh Day’s legal claim against Link. We are delighted for Woodford WEIF investors and gratified that we have endorsed this claim,” said Sharesoc chairman, Mark Northway.
“Sharesoc reviewed the various potential claims and concluded that the Leigh Day claim is well managed and is structured to maximise financial returns to investors. The Leigh Day claim is also a key plank of the Sharesoc Woodford Campaign to improve regulation and hold wrongdoers to account.”
See also: Sharesoc urges shareholders to back Leigh Day Woodford claim after it secures funding
Leigh Day initially looked to bring its case against retail investing platform, Hargreaves Lansdown as around 292,000 of its customers were exposed to the failed fund. However, the law firm turned its attention to Link as its failings in managing the fund became apparent.
Portfolio Adviser revealed rival law firm Harcus Parker had received a reply from Link to its own LBA and plans to launch a multi-million-pound class action before the summer.
