Woodford compensation law firm slams FCA’s £306m pay-out estimate

A law firm representing investors in the collapsed Woodford Equity Income Fund has criticised the financial watchdog over its £306million redress plan.

Savers lost more than £1billion when Neil Woodford’s flagship fund collapsed in 2019 and the Financial Conduct Authority said yesterday the vehicle’s administrator Link Group, which took the decision to suspend the fund before its eventual collapse, will be responsible for compensation for Woodford investors.

But Leigh Day on Tuesday claimed the law firm’s own calculations suggest that if the thousands of affected investors signed up to collective litigation ‘the court claims could be in the billions’.  

Link is denying any breach of City rules and plans to defend itself in the claim.

The FCA has been investigating the circumstances leading to the collapse of the fund and it has now confirmed it is ‘likely to seek to require Link to pay a financial penalty and/or consumer redress’.

It added that Link’s bill had been set at £306million, as this ‘reflects the FCA’s current view of Link’s failings in managing the liquidity of the Woodford Equity Income Fund’.

But Meriel Hodgson-Teall, a solicitor at Leigh Day, has dismissed the figure as ‘nowhere near enough to compensate the many thousands of people who suffered huge and life changing financial losses investing in this fund’.

She added: ‘Leigh Day calculates that if all of the individuals who suffered losses as a result of investing in this fund signed up to the claims proceeding through the courts, the court claims could be in the billions.’

Leigh Day has been recruiting claimants for some time for a group litigation order, which is currently scheduled for December of this year. 

Dye & Durham, a Canadian software company, is planning to buy Link for £2.1billion.

D&D said it had received a warning from the FCA, stating that the City regulator would not approve the takeover unless D&D promised to cover any ‘restitution and/or redress payments’ which Link was ordered to pay.

Hodgson-Teall said: ‘It is astonishing that it has taken a takeover bid of Link Group for the FCA to give this indication that it considers Link did breach its duties regarding the Woodford Equity Income Fund.’

The FCA, which was led by now Governor of the Bank of England Andrew Bailey at the time of the fund’s collapse, has faced criticism for its handling of the scandal.

It has not been alone, however, with critics pointing to wider problems and conflicts of interest with the asset management industry.

Neil Woodford was once perhaps the biggest name fund manager in Britain, amassing huge sums of investor cash in his solo venture after a successful career at Invesco. The 62-year-old is also understood to be a target of the FCA’s investigation.

Hodgson-Teall said: ‘What is not clear is how the FCA will impose a fine or require a redress scheme to be set up to compensate investors, and when this will actually happen. A redress scheme could still be many months, if not years, away.

‘If a redress scheme were to be established, this would be separate to the claims which are ongoing through the courts, including those which Leigh Day is bringing on behalf of our clients.

‘Leigh Day is continuing to work on the court claim, which seeks to compensate investors fully for the losses they have sustained.’