It is anticipated that thousands of investors who suffered losses in Neil Woodford’s income fund collapse will receive further compensation through an agreement made with the City regulator.
Link Group, the firm that was responsible for monitoring Woodford’s management of investor funds, announced that it is close to concluding a deal to sell its struggling British business and resolve an ongoing investigation by the Financial Conduct Authority (FCA).
The potential buyer for the UK-based Fund Solutions is the Irish asset management company Waystone Group. Link also disclosed that parallel negotiations with the FCA are underway, with the regulator demanding a £50m fine and £306m in customer compensation for Link Fund Solutions’ role in the Woodford fund’s failure.
Link stated that if both agreements are reached concurrently, it will receive no net proceeds from the Waystone deal, and the FCA inquiry will be settled, implying that profits from the sale will be given to the regulators. It is unknown how much will be given to the watchdog, but Link stated that it anticipates a charge of 449m Australian dollars (£258m) on its balance sheet under the sales scenario.
Link said that an agreement with the FCA is not a condition for the Waystone sale, and it will maintain exclusive negotiations with the Irish company until the end of March. A settlement with the FCA could result in additional compensation for previous Woodford investors who have already lost over £1bn. Link was the approved corporate director of the Woodford Equity Income Fund, implying that it had a responsibility to monitor the fund and hold the fund manager accountable.
Following mounting withdrawal demands from investors, the fund was suspended in June 2019 when Woodford, who had established significant positions in illiquid stocks, was unable to sell assets quickly enough. Link then closed the fund in October 2019, and when it sold off the shares, it did so at bargain prices, resulting in significant losses for investors.
The FCA launched an investigation into the scandal shortly after the income fund closed but has yet to release any findings. On Monday, the regulator confirmed that it is negotiating a settlement with Link Group.
Leigh Day and Harcus Parker, two law firms, are also filing a separate lawsuit against Link on behalf of more than 2,500 investors who claim that Link failed to adequately monitor how Woodford was using their funds. Link denies any wrongdoing
