The Financial Conduct Authority has tipped its hand on the outcome of its investigation into the collapse of the fund run by Neil Woodford, saying it is “likely” to demand that Link pay up to £300mn over its role in the scandal.
The UK financial regulator has been investigating the demise of the former star stockpicker’s flagship fund. Link, which was the fund’s administrator, froze the fund in June 2019, trapping £3.7bn of investors’ funds.
Savers who lost money through the fiasco, as well as the UK funds industry, have been keenly awaiting the FCA’s report on the Woodford affair, which the regulator had said would be completed by the end of last year but which has not yet been published.
“The FCA has investigated the circumstances leading to the suspension of the [Woodford Fund] and is likely to seek to require [Link] to pay a financial penalty and/or consumer redress,” the regulator said in a statement late on Monday, adding that it may require Link to pay up to £306mn.
The regulator has disclosed its current thinking on the outcome of the continuing investigation following Toronto-based software group Dye & Durham’s takeover bid for Link — a deal that requires the FCA’s approval.
The FCA said on Monday it would approve the deal on the condition that the companies committed to cover an eventual penalty or payment to consumers.
Dye & Durham said it was “assessing the impact” of the conditions. Link Group said it did not agree with the FCA’s view and would “explore all options”, including challenging an eventual demand for a payout.
The company added that it “considers that any liabilities relating to the Woodford matters” would be confined to its subsidiary Link Fund Solutions rather than the wider group.
The FCA said “multiple parties” were still under investigation.
The Woodford Equity Income Fund came under pressure in 2019 as it struggled to meet investors’ demands for redemption from its portfolio, which was partly tied up in private companies’ shares that were hard to sell. The FCA said Link’s liability related to “failings in managing the liquidity” of the fund as its administrator.
Link has returned £2.54bn to investors from the sale of assets in the frozen fund. It has said the remaining assets may not be sold until 2023 or beyond.
The FCA has not said when it expects to publish the results of its investigation. Chief executive Nikhil Rathi said in a letter to the Treasury select committee last December that “all key evidence has been gathered” but the watchdog needed more time to decide what action to take.
Link also faces a brewing class-action lawsuit on behalf of investors. Law firms Leigh Day and Harcus Parker are preparing claims that could run to hundreds of millions of pounds, arguing that investors are due compensation because Link failed to oversee the fund properly, leading to its collapse.
Link has denied these claims.
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