Finally... a tiny bright spot in a never-ending scandal
THE Woodford investment scandal is like a sore that never properly heals. Five years on from the dramatic (and costly) closure of the £3.7 billion Equity Income Fund run by Neil Woodford, the financial wounds it inflicted upon investors continue to weep.
In recent weeks, the 300,000 investors who had money trapped in the fund when it was closed in June 2019 have been dealt a series of blows (the fund was closed because it could not meet a multi-millionpound redemption request from an institutional investor).
First, investors have been fobbed off with what can only be described as the barest minimum of compensation in a deal struck between the regulator (the Financial Conduct Authority) and Link Fund Solutions (the fund’s overseer which failed to keep proper track of what Woodford was investing in).
Then, to rub salt into their already painful financial wounds, many investors who joined group actions against Link have now been told that a sizeable chunk of their compensation will be eroded by a mix of claims management fees, VAT, insurance costs and insurance premium tax (IPT).
As I exclusively reported earlier this month – and The Times Money section flatteringly followed up eight days ago – claims management company Harcus Parker has written to investors who joined its group action telling them they could see more than half of their compensation absorbed by fees. Leigh Day has also told members of its group action to expect bills.
Such actions against Link came to a thundering halt once the £230 million redress scheme was finalised. Some group members were left disappointed, believing the actions offered the best route towards a fair compensation deal.
But such disappointment pales into insignificance against the outrage they now feel as claims companies scramble to cover their costs despite promoting the group actions on the basis of ‘no win, no fee’. As Ian Forbes, a member of the Harcus Parker claim told me earlier this month: ‘Harcus promised us proper compensation, did not deliver, and now wants a slice of a redress payment that had nothing to do with them. I am appalled.’ Ian has since emailed Harcus, stating its decision to charge clients is ‘morally outrageous’.
Thankfully, not all organisers of group actions against Link have sought to mitigate costs.
A few days ago, specialist litigation company RGL confirmed that Woodford investors who joined its group action against Link would not be charged a penny in fees. In explaining its investor-friendly stance, director Michael Green said that Equity Income investors had ‘suffered enough at the hands of Woodford and more recently from the derisory Link settlement offered to them’.
Echoing the sentiments of Ian Forbes, Mr Green added: ‘RGL played no part in the Link scheme, so considers it fair not to benefit from it.’
With Neil Woodford (facing possible enforcement action from the regulator) rubbing investors’ noses in the sand with the launch of a new blog (where he claims ‘I am neither hero nor villain’), RGL’s decision to treat its customers fairly represents a tiny bright spot in an investment scandal that reflects badly on so many.
By ‘many’, I mean the regulator; Link; some of the claims management companies; fund platforms who promoted Woodford as if he was an investment messiah; and a big chunk of the financial media (me included) who did not probe into the Woodford Equity Income Fund until it was too late.
And of course, let’s not forget Neil Woodford – ‘neither hero nor villain’.