Woodford investors urge UK judge to block redress scheme

Link Administration Holdings

18/01/2024 17:27

By Kirstin Ridley
       LONDON, Jan 18 (Reuters) - Investors burnt by the
collapse of a flagship fund run by once-famed stock picker Neil
Woodford urged a London judge on Thursday to block an "unfair"
redress scheme worth up to 230 million pounds ($292 million).
    A lawyer for a group opposing the compensation proposal at a
final High Court "sanction hearing" said it had been
misrepresented, would block retail investors from the protection
of statutory redress routes and only returned 4-6 pence in the
pound for some.
    "This is of enormous public importance," Damian Falkowski,
representing the Woodford Campaign Group and the Transparency
Task Force, which seeks greater transparency in financial
services, told the first day of a two-day hearing.
    "In my submission, it is obvious that any consumer would
want to avail themselves of the jurisdiction of FOS (Financial
Ombudsman Service)."
    The redress proposal by Link Fund Solutions (LFS), the
former authorised corporate director of the Woodford fund, will
block investors from seeking redress via the FOS or up to 85,000
pounds from the Financial Services Compensation Scheme (FSCS),
the fund of last resort when regulated businesses fail.
    The Woodford Equity Income Fund was suspended in 2019 after
outsized bets on illiquid assets, trapping 300,000 investors,
sparking a Financial Conduct Authority (FCA) inquiry and three
lawsuits against LFS and one against Hargreaves Lansdown
 HRGV.L , an investment platform that promoted the fund.
    
    AGGRIEVED
    Thousands of investors last month overwhelmingly backed the
LFS redress plan. But only 54,000 investors voted.
    Felicity Toube, a lawyer for LFS, told the court that the
low turnout was not unusual and that the company had gone "above
and beyond" to advertise and publicise the scheme.
    "No doubt they (opposing investors) feel aggrieved ... and
will say it is unfair they are required to abide by the rule of
the majority," she said. 
    Cliff Weight, a director of shareholder advisory group
ShareSoc that represents retail investors, told the court that
the "woeful" compensation plan fell short of even the FCA's
original calculation of harm of 298 million pounds.
    He suggested the court could help beef up redress by
requesting an FCA restitution order against Woodford Investment
Management, the firm controlled by Woodford and his business
partner Craig Newman, if it approves the scheme.
    Reuters was unable to reach Woodford or Newman.
    The FCA has said LFS made "critical mistakes and errors" in
how it oversaw the Woodford Equity Income Fund's liquidity risk
management and controls. But it has advised shareholders to
accept the scheme to avoid lengthy and costly court battles.
    LFS, which denies liability, says investors will receive
183.5 million pounds this quarter if the scheme is approved. If
the settlement is rejected, it has vowed to fight litigation and
challenge any FCA case.
    
($1 = 0.7887 pounds)

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