Woodford Equity Income Fund savers set for £300m redress

Savers who lost more than £1billion when Neil Woodford’s flagship investment fund collapsed are a step closer to getting £300million of redress.

Thousands of customers were left out of pocket when Link Group – the firm responsible for supervising fund manager Woodford’s management of his funds – decided to suspend the £3.7billion Equity Income Fund in 2019 and eventually close it down.

Now the Financial Conduct Authority (FCA) has confirmed that Link could be on the hook for up to £306million in redress for customers.

Losses: The Woodford Equity Income Fund was frozen after a flood of investors tried to pull their money out after a run of poor performance from manager Neil Woodford (pictured)

The watchdog said last night it has investigated the circumstances leading to the collapse of the fund ‘and is likely to seek to require Link to pay a financial penalty and/or consumer redress’.

Meanwhile, Dye & Durham (D&D), 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. 

The FCA said 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’.

This is the first time that the City watchdog has confirmed it will penalise Link over its handling of the affair.

The regulator said it was still open to ordering ‘other parties’ as well as Link to pay redress to customers.

Sixty-two-year-old Woodford himself was also understood to be a target of the FCA’s investigation.

The FCA began a probe into the scandal shortly after the Equity Income Fund was shut in June 2019 – but Woodford savers are yet to hear the outcome.

D&D said it was assessing the FCA’s conditions – and that if it decided it could not accept them, the deal would be called off.

The Woodford Equity Income Fund was frozen by Link after a flood of investors tried to pull their money out after a run of poor performance from Woodford. He invested a chunk of their cash into risky early-stage and unlisted stocks, and was unable to sell them fast enough to return the money.

When Link realised the extent of the problem, it decided to close the fund down entirely, selling off the stocks and returning the money to investors. 

But several of the sales were completed at a knock-down price, and savers have lost around £1billion since the fund was shuttered in June 2019.

Law firms Leigh Day and Harcus Parker are also bringing a separate claim against Link on behalf of more than 2,500 investors, who claim Link failed to properly keep an eye on how Woodford was using their money.

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

This post first appeared on Dailymail.co.uk