Link Fund Solutions (LFS) has agreed with the Financial Conduct Authority to provide redress payment of up to £235m ($293m,€267m) to investors still trapped in the collapsed Woodford Equity Income Fund (Weif), provided LFS’s proposed sale to Irish asset manager Weystone Group goes ahead.
Upon the conclusion of its investigation into LFS, the FCA said on 19 April that it had made “critical mistakes and errors”, as Weif’s authorised corporate director, in managing the fund’s liquidity.
In September last year, the FCA hit LFS with a £50m fine, and ordered that up to £306m be set aside to repay those investors still stranded in Neil Woodford’s defunct fund.
Following negotiations, both parties have settled on a figure of £235m, largely due to the fact that the original sum was substantially greater than the remaining assets of LFS. Despite the reduced figure, the FCA maintained that the “significant redress payment” would cover the losses sustained by over 300,000 investors as a result of LFS’s failings.
The deal still rests on the completion of LFS’s proposed sale to Waystone Group, as well as the approval by the investors, and the court, of a scheme of arrangement to resolve all LFS’s liabilities relating to the fund.
However, these hurdles appear surmountable. The sale of LFS by its parent company Link Group seems to be progressing well; Link announced on the Australian Stock Exchange on 20 April that it had reached a conditional agreement for the sale of its Fund Solutions business to Waystone for between £110m and £140m.
AJ Bell’s head of investment partnerships Ryan Hughes was hopeful of a positive outcome. He said: “It must be assumed that the FCA have a strong level of confidence that the sale of the business will go through, and it would be a surprise if Woodford investors didn’t approve the deal given how long this saga has dragged on for.”
He added: “While approval of this redress scheme with Link would close the case and liabilities against them, the FCA points out that this remains a live investigation with other parties remaining under investigation.
“As a result, the Woodford drama will drag on past the four year mark, but many investors will no doubt be glad that significant progress now looks to have been made. While it will take some time for this redress process to complete and for payments to be made, investors are one step closer to being able to finally put this whole sorry episode to bed.”
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