- Stranded Woodford investors to get up to £235 million
- Money retrieved now 77% of fund value at suspension
- Other parties being investigated
A long-awaited victory for over 300,000 investors was cemented on Thursday after the Financial Conduct Authority and Link Fund Solutions (LFS) agreed a ‘significant redress’ of up to £235 million to investors in the LF Woodford Equity Income Fund (the WEIF).
The decision comes 1,417 days after the fund was suspended and along with several other distributions made over the last three years takes the total recovery level to around 77% according to Ryan Hughes, head of investment partnerships at AJ Bell (AJB).
Hughes commented: ‘As detailed in September 2022, the FCA found serious failings in the oversight and operation of the fund by Link and the investigation has concluded that this resulted in serious detriment for those investors who remained in the fund from September 2018.
‘Essentially, poor liquidity management meant investors in the fund were left with disproportionately high exposure to illiquid assets which ultimately brought down the fund as it could no longer repay investors who wanted to sell their holdings.
‘The scale of this illiquidity can still be seen today with some assets remaining unsold nearly four years later.’
BREACH OF FCA PRINCIPLES
The FCA lays out fundamental principles which regulated firms are obliged to follow.
The FCA considers those investors who remained in the fund following its suspension were treated unfairly, breaching Principle Six, while LFS’s failure to ‘carry out its activities with due skill, care and diligence’ was a breach of Principle Two.
Therese Chambers, executive director of enforcement and market oversight at the FCA, commented: ‘We believe the proposed Scheme offers investors the best chance to obtain a better outcome than might be achieved by any other means and it is in the investors’ interests they be given the chance to consider it.’
While today’s announcement represents good progress, the FCA points out there are other parties still under investigation which means the Woodford drama may take longer to play out.
Hughes said: ‘While it will take some time for this redress process to complete and for payments to be made, investors are one step closer to being able to finally put this whole sorry episode to bed.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor of the article (Ian Conway) own shares in AJ Bell.
