Experienced Investor
Hargreaves Lansdown to face more legal action over Woodford
A separate group action against Woodford and Link Fund Solutions, headed up by law firm Leigh Day, is already underway.
Hargreaves Lansdown continued to recommend the Woodford Equity Income Fund, headed up by Neil Woodford to its clients right up until its suspension in June 2019.
Hargreaves Lansdown formerly operated a ‘best buy’ list of recommended funds known as the ‘Wealth 50’ (previously the ‘Wealth 150’). The rankings were designed to help investors make informed choices about which funds to invest in.
The Woodford Equity Income Fund was on the Wealth 50 list from its launch in 2014 until 3 June 2019, the day on which the fund was suspended.
Wallace says that Hargreaves Lansdown continued to promote the fund during that period despite the fact that the fund’s performance relative to the FTSE All-Share Index declined sharply over 2017 to 2019.
It says Hargreaves Lansdown also appears to have known of certain liquidity and portfolio imbalance issues within the fund since at least November 2017.
The proportion of the Woodford Equity Income Fund invested in FTSE 100 companies had been plummeting for some time, whereas holdings in volatile and illiquid shares in a variety of AIM-listed and unquoted companies had significantly increased.
On 3 June 2019, Link Fund Solutions Limited, the fund’s FCA-authorised corporate director, determined that the fund was not able to meet redemption requests in an orderly manner and therefore suspended the fund so that investors could not redeem their shares.
On 15 October 2019 Link confirmed that the fund would be wound up through the liquidation of its remaining investment portfolio to start in January 2020.
After the suspension and subsequent liquidation of the Woodford Equity Income Fund, investors questioned why Hargreaves Lansdown failed to update its clients regarding developments in the fund, continued to promote the fund, and continued to include it on the Wealth 50 list, despite being aware of the issues it was facing.
Hargreaves Lansdown has since replaced the Wealth 50 list with a new ‘best buy’ list.
RGL Management is also taking legal action against Link Fund Solutions, the fund’s authorised corporate director.
Woodford announced last month that he plans to start a new investment firm based in Jersey. However, the Financial Conduct Authority (FCA) has cast doubts on whether it would be allowed to go ahead.
Hargreaves Lansdown declined to comment.
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