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Woodford investors offered up to $292 million over fund failure

Published 04/20/2023, 04:14 AM
Updated 04/20/2023, 07:51 AM
© Reuters. FILE PHOTO: Signage is seen for the FCA (Financial Conduct Authority), the UK's financial regulatory body, at their head offices in London, Britain March 10, 2022. REUTERS/Toby Melville

By Kirstin Ridley

LONDON (Reuters) -More than 300,000 investors in the failed equity income fund run by one-time star stock picker Neil Woodford have been offered potential redress of up 235 million pounds ($292 million) after a four-year British investigation.

The Financial Conduct Authority (FCA) said investors should consider the proposal by Link Fund Solutions (LFS), once the authorised corporate director of the LF Woodford Equity Income Fund (WEIF), which was backed by its Australian parent Link Administration Holdings.

The failure of Woodford's fund, which managed billions of pounds before it was suspended amid political and public outcry in 2019, triggered the FCA inquiry and three London lawsuits - and drawn in investment platform Hargreaves Lansdown.

Woodford, once one of Britain's most high-profile investors, was criticised for holding illiquid assets after his fund struggled to meet redemption requests following months of underperformance. It was closed and is being wound up.

The proposed settlement falls short of an earlier FCA demand that WEIF investors receive around 300 million pounds and LFS face a 50 million pound fine. But the regulator said the deal might allow investors to recover 77 pence in the pound.

Matthew Patching, a lawyer at Harcus Parker, which is representing thousands of claimants, said investors would be "outraged" that the FCA was backing a deal that returned only about one-fifth of their losses.

Cliff Weight, a spokesperson at ShareSoc, agreed the redress looked out by "an order of magnitude".

The settlement hinges on the sale of part of Link, which includes LFS, to Dublin-based fund manager Waystone Group, along with investor and court approval.

The FCA said LFS, which was responsible for ensuring the WEIF operated with appropriate liquidity risk management and controls and that all investors were treated fairly, made "critical mistakes and errors".

Therese Chambers, head of enforcement and market oversight, said LFS' actions appeared to have caused significant losses for investors who remained in the fund when it was suspended.

© Reuters. FILE PHOTO: Signage is seen for the FCA (Financial Conduct Authority), the UK's financial regulatory body, at their head offices in London, Britain March 10, 2022. REUTERS/Toby Melville

She said the proposed scheme offered the best chance of the best outcome. A further investor update is expected in July.

($1 = 0.8039 pounds)

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