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Watchdog pushes for Woodford redress as Fund Solutions arm set for sale

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The financial regulator has renewed its commitment to seek redress for failed Woodford investors, as Link Group confirms it is in negotiation to sell its Fund Solutions business.

Link Group announced it is in “exclusive negotiation” with asset management service firm Waystone Group regarding the sale of its Fund Solutions business, excluding Woodford-related liabilities.

In the announcement on the Australian Securities Exchange today, Link Group said any transaction with Waystone is “subject to successful finalisation of due diligence and detailed legal agreements” which it hopes will conclude before the end of March 2023.

It comes as Link Group and its subsidiary Link Fund Solutions Limited (LFS) – the administrator behind the failed Woodford Equity Income fund run by disgraced Neil Woodford – confirmed they are in “advanced confidential discussions” with the Financial Conduct Authority (FCA) to settle its investigation into LFS.

Penalty and redress

In September 2022, the FCA issued LFS a draft warning notice with a proposed penalty of £50m on top of the £306m of redress identified by the watchdog earlier in the month, “reflecting the FCA’s current view of LFS’s failings in managing the liquidity of Woodford Equity Income fund”.

The Woodford Equity Income fund (WEIF), run by former star money manager Neil Woodford (pictured), was suspended in June 2019 following an increase in redemption requests which couldn’t be readily met.

In October 2019, Link confirmed the £3bn fund would be wound-up with cash returned to investors “as soon as possible”.

As part of the Link update today, it said the likely outcome of the sale to Waystone and of settlement with the FCA – if both are concluded – is that Link Group “would receive no net proceeds of the sale of its FS business”.

It added: “If a settlement is agreed with the FCA, it would resolve the current FCA investigation and would also be contingent on a scheme of arrangement of LFS to resolve all Woodford-related contingent liabilities and redress obligations of LFSL. A sale of the FS Business to Waystone would not be contingent on the scheme of arrangement or any FCA settlement becoming unconditional.”

Further, it said it expects to recognise a non-cash impairment charge of approximately $449m in its financial results for the half year ended 31 December 2022.

“Link Group’s liquidity position remains strong and after the impairments, significant headroom remains under Link Group’s covenants with its lenders,” it added.

Resolution for affected investors

A statement by the FCA, read: “The FCA is focused on ensuring that consumers affected by the suspension of the Woodford Equity Income fund (WEIF) obtain redress.

“To assist a potential resolution, the FCA has provided time for Link Group to realise assets, including Link Group held assets, to meet the FCA’s concerns.

“We have previously set out that any redress figure would be based on our view of LFS’s failings in managing the liquidity of the WEIF.

“We know that affected investors will be keen to understand what impact this may have on them, including how any proposed scheme of arrangement would work. We will provide a further update as soon as we are able to.”

A takeover bid for the Link Group by Australian Securities Exchange and Dye and Durham (D&D) to the Toronto Stock Exchange last year stalled amid the redress condition imposed by the FCA.

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