Woodford fund manager Link faces £306m fine

Regulator’s move opens the door to compensation for thousands of investors who lost money in collapse

THE City regulator is preparing a fine of up to £306m for the administrator of Neil Woodford’s collapsed income fund, raising the prospect of significant compensation for the thousands of investors who backed the once star stock picker’s vehicle.

The Financial Conduct Authority (FCA) is set to sanction Link Fund Solutions over its role in the collapse of the Woodford Equity Income Fund.

Link was the so-called authorised corporate director of the Woodford Equity Income Fund (WEIF), which meant it had a duty to monitor the fund and hold the fund manager to account.

Mr Woodford’s fund was suspended in June 2019 after the stock picker, who had built large positions in hard-totrade shares, was unable to sell assets quickly enough to meet mounting withdrawal requests from investors.

The fund was shut in October 2019, leaving more than 300,000 savers nursing heavy losses.

The FCA said it was “likely” to hit Link with a “financial penalty and/or consumer redress” of up to £306m following an investigation that has lasted nearly three years.

The regulator has yet to conclude its investigation into Link but made the announcement yesterday in light of the fact Link is in the process of being bought by Toronto-based Dye & Durham, as part of a $1.7bn (£1.5bn) deal to acquire Link’s parent company.

The FCA said it will not approve the deal unless the Canadian company agrees to cover the liabilities related to Link’s role in the Woodford blow-up.

The regulator said: “The FCA has investigated the circumstances leading to the suspension of the WEIF and is likely to seek to require LFS to pay a financial penalty and/or consumer redress.

“The FCA’S current view is that the redress payment LFS could be required to pay may be up to £306m.

“This redress proposal reflects the FCA’S current view of [Link]’s failings in managing the liquidity of the [Woodford fund]. It does not reflect any amount which may be owed to anyone else, including members of the fund, as a result of potential wrongdoing by other parties.”

It added that it has not yet made a final decision on the penalty and Link has a right to challenge any decision via the FCA’S decisions committee and Upper Tribunal.

The proposed penalty is the latest development in the collapse of the stock picker’s fund nearly three years ago.

In June, two groups of investors joined forces in a multimillion-pound lawsuit over the collapse. London law firms Leigh Day and Harcus Parker filed a group claim in the High Court against Link, seeking tens of millions of pounds in damages over its handling of the saga. The firms allege that Link netted millions of pounds in fees but failed to adequately supervise the £3.7bn fund.

Link previously said it will be “vigorously defending” the charges, adding that it acted “in accordance with applicable rules, as well as in the best interests of all investors, and it will continue to do so”.

Last year, Mr Woodford, who is not a target of the lawsuit, lashed out at Link and rejected widespread criticisms of his operating style. He said: “I can’t be sorry for the things I didn’t do. I didn’t make the decision to suspend the fund. I didn’t make the decision to liquidate the fund. As history will now show, those decisions were incredibly damaging to investors, and they were not mine. They were Link’s decisions.”

The regulator said: “The FCA is continuing to investigate matters relevant to the operation of the fund. Fca-determined redress is based on misconduct rather than losses caused by fluctuations in the market value or price of investments.”

Link declined to comment.