Link ready to fight as FCA warns would-be buyer likely on the hook to pay £300m in redress

But no word yet on if or how it will be distributed to Woodford investors

Neil Woodford

The proposed acquisition of Link Group by Canada-based software and tech solutions firm Dye & Durham (D&D) hit a bit of a snag on Monday after the Financial Conduct Authority imposed conditions relating to the collapse of the Woodford Equity Income Fund (WEIF).

The takeover would involve the acquisition of seven firms authorised by the FCA, including wholly-owned subsidiary Link Fund Solutions (LFS), which managed WEIF. It has so far given the greenlight to six changes in control, with approval for LFS still outstanding.

On Monday, the watchdog issued a warning notice stating it will not approve the deal unless D&D agrees to make up to £306m available to meet any shortfall in the sum available to cover redress payments to investors in Neil Woodford’s (pictured) defunct fund.

Unsurprisingly, the news has not gone down well with Link Group. In an announcement on the Australian Stock Exchange on Tuesday, it said “LFS will explore all options, including challenging any warning notice” as it “does not agree with the FCA’s view”.

“Link Group remains supportive of LFS considering all such options, and notes that LFS continues to trade profitably with a leading position in its market. Link Group has not made any commitment to fund or financially support LFS.”

The company added that it considers “any liabilities relating to the ‘Woodford Matters’ will be confined to LFS”.

See also: Woodford pulls the plug on UK comeback venture

‘Nowhere near enough’

The three-year anniversary of the collapse has come and gone, with investors still trapped in the fund. Worth £3.5bn when it was suspended in June 2019, only £2.54bn has so far been returned. Recent valuation write-downs, however, mean future payments may be in doubt.

Law firms Leigh Day and Harcus Parker combined their legal actions against Link Fund Solutions in June in order to have a better chance of recouping losses for investors.

Meriel Hodgson-Teall, solicitor at Leigh Day, said: “The reported £306m 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.

“It is astonishing that it has taken a takeover bid of Link Group for the FCA to give this indication that it considers Link did breach its duties regarding the Woodford Equity Income Fund.

“What is not clear is how the FCA will impose a fine or require a redress scheme to be set up to compensate investors, and when this will actually happen. A redress scheme could still be many months, if not years, away.

“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 on the court claim, which seeks to compensate investors fully for the losses they have sustained,” Hodgson-Teall added.

The next steps for the court case is the hearing for the group litigation order which is now scheduled for December 2022, Leigh Day advised.

And the solicitors are not the only ones concerned about if and how the money might be returned to investors, with AJ Bell head of investment partnerships, Ryan Hughes, adding: “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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