Woodford investors label FCA-backed redress scheme grossly unfair

Link Administration Holdings

13/12/2023 15:20

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      FCA has told investors to accept LFS's settlement scheme
    

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      Redress plan designed to put industry interests
first-investors
    

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      "I now feel much less safe" - Woodford investor
    

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      Vote for scheme to be announced within days
    

  
    By Kirstin Ridley
       LONDON, Dec 13 (Reuters) - Britain's markets regulator
is facing a backlash from retail investors in a collapsed fund
once managed by former star fund manager Neil Woodford over its
endorsement of a redress scheme some label grossly unfair.
    The Financial Conduct Authority (FCA) has said Link Fund
Solutions (LFS) made "critical mistakes and errors" while
overseeing the Woodford Equity Income Fund (WEIF), which was
suspended in 2019 after over-sized bets on illiquid assets,
trapping around 300,000 investors. 
    But it has also advised investors to accept LFS's settlement
proposal of up to 230 million pounds ($288 million) - a fraction
of the 1.0 billion pounds some investors and law firms are
demanding - rather than face lengthy and costly court battles.
    The row comes five months after the FCA pledged to draw a
line under decades of mis-selling scandals with a new Consumer
Duty to protect customers from unfair practices and instil fresh
confidence in British financial services. 
    Days before the outcome of a vote is announced on LFS's
proposal, that seeks to settle its liabilities, some say
confidence in the FCA and consumer protection has been shaken.
    "I now feel much less safe," said Margaret Woodward in an
impact statement published by the Woodford Campaign Group, an
investor group. "I have withdrawn many other investments to cash
ISAs (tax-free savings accounts) and would be much less likely
to invest in the future."
    The failure of the WEIF, which once managed more than 10
billion pounds, sparked an FCA investigation, three investor
lawsuits against LFS and one against investment platform
Hargreaves Lansdown  HRGV.L , which promoted the fund.
    But some investors are cross the FCA is endorsing a scheme
that, if approved, will block them from seeking greater redress
via the Financial Ombudsman Service or up to 85,000 pounds from
the industry-funded Financial Services Compensation Scheme
(FSCS), the fund of last resort when regulated businesses fail.
    
    VOTING COMPLICATED
    They also say the scheme has been poorly explained, the
voting process too complex - some say they struggled to
demonstrate they had a right to vote - and feel coralled into a
settlement they say is designed to put industry interests first.
    "We are told that there are regulating authorities in place
to detect and deal with rogue traders and that if we are treated
unfairly, there are independent authorities to handle such
complaints and ensure we are not out of pocket," said David
Crowther, another Woodford investor.
    "It has become clear ... there is no real investor
protection at all," he added in an impact statement seen by
Reuters.
    The FCA has said LFS's proposal does not reflect
compensation that might be owed by others over potential
wrongdoing - and that "multiple parties" remain under
investigation over events that led to the WEIF suspension.
    "This redress scheme offers the quickest route for redress
for the vast majority of people," the FCA said. "Payouts through
other means such as litigation or the FSCS are not guaranteed
and will likely take longer to achieve. 
    "We firmly believe that what is being offered by Link
warrants serious consideration by investors."
    LFS did not have an immediate comment. But the company has
said that its proposal, which will only be approved if 75% of
investors by value and 50% by number vote for it, will allow it
to distribute to investors the maximum amount possible in the
shortest possible time.
    
($1 = 0.7978 pounds)

 (Reporting by Kirstin Ridley; Editing by Sharon Singleton)
 ((kirstin.ridley@thomsonreuters.com; +44 (0) 207 513 5666;))