Woodford investors back call for probe into redress scheme -draft letter

Link Administration Holdings

22/11/2023 15:26

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      Lawmaker to call for judge-led inquiry - draft letter
    

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      Redress scheme 'woefully inadequate' -investor group
ShareSoc
Proposal reflects breaches of rules, not losses - FCA
    

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      Investor vote on redress plan closes on Dec. 4
    

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      Outcome expected on Dec. 15
    

  
    By Kirstin Ridley and Carolyn Cohn
       LONDON, Nov 22 (Reuters) - Around 400 investors have
signed a British lawmaker's letter calling for a judge-led
inquiry into how the Financial Conduct Authority (FCA) handled
the multi-billion pound collapse of a fund run by former star
stockpicker Neil Woodford.
    Ten days before voting closes on a proposed redress scheme,
that could cap damages below 200 million pounds ($250 million),
the chair of an all-party parliamentary group (APPG) is urging
the government to step in, a draft letter seen by Reuters shows.
    The FCA has urged investors to seriously consider accepting
the offer after the failure of the LF Woodford Equity Income
Fund, that was valued around 3.65 billion pounds at its collapse
in 2019 following out-sized bets on illiquid assets.
    But Bob Blackman, chair of the APPG on banking and fairer
financial services, accuses the FCA of understating investor
losses, misrepresenting the value of the redress scheme, acting
inappropriately by endorsing it and failing investors by not
fully publishing its own investigation into the scandal.
    Blackman is calling for a meeting with City Minister Bim
Afolami, who is responsible for financial services, to discuss
"misconduct and regulatory failures". He wants to make the case
for an independent inquiry "in due course", the draft letter
shows.
    "Inevitably ... the message gets out that the UK financial
system is a 'caveat emptor' market in which negligence and
dishonesty go unchallenged by a complacent or even complicit
regulator, and there is no route to redress for innocent
victims," it says. The final wording could change.
       
    LOW-BALL SCHEME?
    The failure of the fund sparked political and public outcry,
an FCA inquiry and three investor lawsuits against Link Fund
Solutions (LFS), once the fund's authorised corporate director.
    About 300,000 investors have been offered the LFS redress
scheme that could see damages set around 180 million pounds
after costs, liabilities and expenses - a fraction of the 1
billion pound-plus redress suggested by some investors and law
firms, court filings show.
    Investor group ShareSoc has labelled the proposal "woefully
inadequate". The FCA rejects allegations it is backing a
low-ball scheme. 
    "The proposed redress reflects the loss caused by LFS'
failure to comply (with) the FCA's principles," a spokesperson
said. "It does not, nor is it intended to, reflect any losses
caused by a deterioration in the performance of the underlying
investments in the fund."
    If the proposal is approved, investors in the fund at its
suspension will be barred from seeking compensation of up to
85,000 pounds from the Financial Services Compensation Scheme
(FSCS), the fund of last resort when regulated British firms
fail, or from further legal action, court filings show.
    LFS proposed the scheme after a four-year FCA investigation
into the Woodford fund. In draft findings, the FCA said LFS had
made "critical mistakes and errors", ordered a 300 million pound
compensation fund and a 50 million pound fine.
    The outcome of the vote is expected to be announced on Dec.
15. If it is approved, a judge will make a final ruling on its
fairness at a hearing in January.
($1 = 0.8025 pounds)

 (Editing by Sinead Cruise and Emelia Sithole-Matarise)
 ((kirstin.ridley@thomsonreuters.com; +44 (0) 207 513 5666;))