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Woodford administrators Link Fund Solutions face further £50m hit

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Link Fund Solutions (LFS) – the administrators behind the collapsed Woodford Equity Income fund – could face a further £50m hit over its “failings”, the financial regulator has announced.

The Financial Conduct Authority (FCA) has issued LFS a draft warning notice which includes a proposed penalty of £50m following its investigation.

It was quick to state that the warning notice “is not a final decision” as LFS, a subsidiary of Link Group, will now have 14 days to respond.

But the £50m penalty comes on top of the £306m of redress identified by the FCA last week, “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”.

However, in the latest update to trapped investors, Link warned they may need to wait until 2023 to get their final wind-up payment which would also be less than initially expected.

Leigh Day, the legal firm acting on behalf of investors to bring a claim against LFS, previously said the £306m redress is “nowhere near enough” to compensate thousands of people who suffered “huge and life-changing financial losses” investing in this fund.

‘Investors deserve better’

Today’s update from the FCA comes off the back of last week’s news of a takeover bid for the Link Group by Australian Securities Exchange and Dye and Durham (D&D) to the Toronto Stock Exchange which includes the acquisition of seven firms (including Link Fund Solutions Ltd) authorised by the regulator.

The FCA confirmed it had decided to approve D&D’s acquisition of LFS, subject to a condition to make funds available to meet any shortfall within LFS in the amount available to cover any redress payments it may be required to make.

The city watchdog said: “The FCA’s priority is to protect consumers and the integrity of the UK financial system. With the investigation into LFS complete, it is right to progress it by issuing a draft warning notice. The FCA is focused on ensuring that the right funding is in place so affected consumers are able to access as much redress as possible”.

It added there are multiple parties under investigation in relation to the circumstances that led to the suspension of WEIF. “These investigations continue and they will consider any further failings which may have negatively impacted investors”, it said.

Dzmitry Lipski, head of funds research at Interactive Investor, said: “The drip, drip, drip of information over the past several days is a curious way to conduct a major investigation after three years of silence. Many questions remain unanswered, the issue of redress is far from certain, and wider investigations are still ongoing. The answers that investors have long awaited have essentially been front run by a potential deal. Investors deserve better.”

‘Sorry episode getting closer to completion’

Ryan Hughes, head of investment partnerships at AJ Bell, said: “News that the FCA has issued Link Fund Solutions a draft Warning Notice in relation to its activities with the WEIF hopefully indicates that the investigation is now moving towards its final phases.

“With this news coming so soon after the potential £306m redress announcement, investors impacted by the WEIF saga will be increasingly hopeful that this sorry episode is getting closer to completion. After three long years, investors have waited patiently for the FCA to unearth what went wrong and hopefully put in place some form of compensation for investors. It now seems like they might finally be getting somewhere.”

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