Woodford investors offered up to $292 million if fund defaults

By Kirstin Ridley

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

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

The collapse of Woodford’s fund, which managed billions of pounds before being suspended due to political and public outcry in 2019, sparked the FCA investigation and three trials in London – and dragged down the investment platform Hargreaves Lansdown.

Woodford, once one of Britain’s most high-profile investors, was criticized for holding illiquid assets after his fund struggled to meet redemption requests following months of underperformance. It has been closed and is in the process of being liquidated.

The proposed settlement falls short of an earlier FCA demand that WEIF investors would receive around £300m and LFS would face a £50m fine. But the regulator said the deal could see investors recover 77p in the pound.

Matthew Patching, a lawyer at Harcus Parker, which represents thousands of claimants, said investors would be “outraged” that the FCA supported a deal that would only bring them around a fifth of their losses.

Cliff Weight, a spokesperson for ShareSoc, acknowledged the repair was “an order of magnitude.”

The settlement is contingent on the sale of part of Link, which includes LFS, to Dublin-based fund manager Waystone Group, as well as investor and court approval.

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

Therese Chambers, head of enforcement and market monitoring, said LFS’s actions appeared to have caused significant losses to investors who remained in the fund during its suspension.

She said the proposed system offered the best chance of achieving the best outcome. A new update for investors is expected in July.

($1 = 0.8039 pounds)

(Reporting by Kirstin Ridley; editing by Sharon Singleton and Alexander Smith)