UK regulator promises £235m Woodford payout as Link investigation ends

The UK's Financial Conduct Authority has concluded its investigation into Link Fund Solutions over the Woodford Equity Income fund, stating that £235m is set to be paid back to Woodford investors.

In a statement yesterday evening (19 April), the FCA said that following the conclusion of its investigation, there would be a "significant redress payment to investors in the LF Woodford Equity Income fund".

This payment would end the regulator's enforcement action against Link Fund Solutions, it said, though there were still "other parties" under investigation over the collapse of Woodford's fund.

The £235m payment would be partially funded by the sale of LFS by Link Group to Australian firm Waystone Group.

In an Australian stock exchange announcement today, Link Group confirmed it had reached a conditional agreement to sell LFS to Waystone Group, for between £110m and £140m.

The deal will exclude its Luxembourg and Swiss entities, as well as any Woodford related liabilities, and is set to be completed by October next year.

'Critical mistakes'

In its statement, the FCA accused Link Fund Solutions of making "critical mistakes and errors" in managing the WEIF's liquidity, leading to the fund failing to have a "reasonable and appropriate liquidity profile" from September 2018.

Approximately £298m had been lost from the failures in liquidity management when the fund was shuttered in 2019, the FCA said, with over 300,000 investors still yet to be made whole.

This means that with the £235m payment, the most investors will get back is 77p on the pound.

However, the contributions by Link Group were voluntary, the FCA said, as Link Group said it had "no legal responsibility for the obligations of Link Fund Solutions", including losses caused to investors in Woodford, adding that they had cooperated throughout the investigation.

"These investigations continue, and they will consider any further failings which may have negatively impacted investors," it added.

In total, LFS currently has a net balance of cash and resources of about £47m, with insurance cover of about £48m.

If the sale of LFS does not end up being finalised, Link Group said it will not make the payment, and the FCA said it would proceed with its enforcement case against LFS, "which LFS has indicated will be fully contested".

This would include a proposed £50m financial penalty on LFS.

Therese Chambers, executive director of enforcement and market oversight at the FCA, said: "The FCA's investigation raised serious concerns about Link Fund Solutions' management of the liquidity of the Woodford Equity Income Fund.

"LFS's actions appear to have caused significant losses for those investors who remained in the fund when it was suspended.

"We believe the proposed scheme offers investors the best chance to obtain a better outcome than might be achieved by any other means and it is in the investors' interests they be given the chance to consider it."