JEFF PRESTRIDGE: When will Woodford investors see a payout? Government not inclined to compensate them for the losses they have suffered
Brazen double standards. That was the verdict last week of many Woodford Equity Income fund investors who contacted me in response to the Government’s announcement of the compensation it will pay savers who lost money as a result of the failure of mini-bond provider London Capital & Finance.
On the one hand, they expressed delight that the Government will pay these bondholders £120million in compensation as a result of the City regulator’s abject failure to protect their financial interests. The compensation will result in some 10,000 investors receiving 80 per cent of the value of their original investment, capped at £68,000.
On the other, they are seething that so far there appears no inclination to compensate them for the losses they have suffered as a result of the failure of the same regulator (the utterly useless Financial Conduct Authority) to ensure Woodford Equity Income (and its manager Neil Woodford) was abiding by the rules before it was suspended in June 2019. As things stand, their only route to financial justice lies through class action lawyers fighting their corner.
Anger: The FCA failed to ensure Woodford Equity Income (and its manager Neil Woodford) was abiding by the rules
It’s hard not to be sympathetic towards these Woodford investors. Compensation for LC&F bondholders was triggered by a hard-hitting independent review into the Financial Conduct Authority’s regulation of LC&F.
Conducted by retired judge Dame Elizabeth Gloster and published late last year, it concluded: ‘Bondholders, whatever their individual personal circumstances, were entitled to expect, and receive, more protection from the regulatory regime in relation to an FCA-authorised firm (such as LC&F) than that which, in fact, was delivered by the FCA.’
Yet, much to the anger of many Woodford Equity Income investors, no similar independent review has so far been ordered into the regulator’s role surrounding the suspension and demise of the fund they were invested in.
Indeed, the only ‘investigating’ that has taken place (and I use that word very loosely) has been by the FCA itself. As of today – 22 months after promising to look into the issue – it has yet to utter a single word about what it intends to do. Maybe, its silence stems from the fact that the FCA knows it is as guilty as others involved in this sorry investment debacle.
Said one Equity Income investor last week: ‘It’s an outrageous injustice that one set of victims of regulatory failure [LC&F savers] is being compensated by the Government while another [WEI investors] has to resort to class action lawyers to fight their corner. It’s an egregious example of double standards.’
Absolutely, it’s time for the Government to order an independent investigation into the regulation of Woodford Equity Income. I can think of no better person to conduct this than Dame Elizabeth Gloster.
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Talking of compensation, I was contacted last week by a victim of the Equitable Life scandal (sadly, he has also lost money in Woodford Equity Income). He wanted to know whether any more compensation would be paid to people like him whose savings were savaged as a result of the near collapse of the insurer in 2000.
The answer, I am afraid to report, is a big ‘no’. Last week, Treasury officials told the Public Accounts Committee that all records of Equitable Life compensation claims had now been destroyed by NS&I – the organisation responsible for overseeing compensation payments of £1.5billion ordered in 2010 by former Chancellor of the Exchequer George Osborne. They said this had been done because they considered the compensation scheme closed.
For the enquiring reader, it means he will have received a fraction of the compensation he thought he would get to cover his losses. And he’s not alone – hardened Equitable Life campaigners believe the shortfall in full compensation ordered by the Parliamentary Ombudsman in 2008, stands at around £2.6billion.
Conservative MP Bernard Jenkin, a member of the PAC, said at last week’s session that the records being destroyed ‘doesn’t strengthen public confidence, certainly when in the minds of many there is unfinished business’.
Knowing the zeal of those who run the Equitable Members Action Group, I don’t think we’ve heard the last of this act of destruction.