The Financial Conduct Authority (FCA) has proposed a redress scheme for investors in the former Woodford Equity Income fund. The scheme will provide up to £235 million in compensation to investors who lost money when the fund was suspended in October 2019.
The FCA found that Link Fund Solutions, the fund’s Authorised Corporate Director (effectively the fund trustee and administrator), had failed in its role to act with due care, skill and diligence and to adequately manage the fund’s liquidity. This failure meant that the fund was unable to meet redemption requests from investors, which led to its suspension.
The redress scheme will be funded by Link Fund Solutions and its parent company, Link Group. Investors will be eligible for compensation if they held shares in the Woodford Equity Income fund in October 2019, when the fund was suspended. The amount of compensation each investor receives will be based on the number of shares they held and the value of those shares on the day the fund was suspended.
A note of caution, our current understanding is that the redress scheme is contingent on the sale of Link Fund Solutions to a third party, which has not yet concluded. Until that sale is confirmed, the redress scheme cannot be finalised and the scheme would be at risk, if the sale of Link Fund Solutions did not proceed. The scheme will also need regulatory and high court approval, as well as investor agreement, although it would seem unlikely this would not be agreed.
Until the sale of Link Fund Solutions completes and the redress scheme is finalised, it is not possible to confirm to investors the amount of compensation that they will potentially receive. Yesterday’s announcement is however positive news for all investors in the fund. No action is currently required to benefit from the redress scheme. We hope to hear confirmation that the sale of Link Fund Solutions has been successful and to have further details of the redress payments, later in the year.
