An investor body has criticised the offer of redress to investors in the Woodford Equity Income fund organised by the Financial Conduct Authority, calling the regulator’s communications “confusing”.
The UK Individual Shareholders Society, known as Sharesoc, said the FCA has a “fundamental conflict” between its role in protecting consumers, and its “apparent desire” to avoid creating a claim with the Financial Services Compensation Scheme.
After the collapse of Neil Woodford's eponymous fund, the FCA agreed a £235mn payout with Link Group, parent company of the WEIF’s authorised corporate director, Link Fund Solutions.
The deal protects Link from further claims if it is approved by shareholders in the fund.
The regulator has said this scheme represents the “best chance” for investors to obtain a better outcome than might be achieved by any other means, and has recently hit out at some of the private litigation, as well as "self-interested" criticism of its deal.
A spokesperson for the FCA said the ultimate decision about the redress scheme is down to Woodford investors.
“However the FCA’s view is that the scheme – which includes a voluntary contribution from Link Group – is the quickest and best way to return as much money to investors as possible,” the spokesperson added.
“The outcome of any litigation and claims to the FSCS are not certain – and any FSCS claims would not cover investment loss”.
However, ShareSoc said this is confusing as redress claims are for damages, not investment losses.
The group said the regulator has “failed to point out” that, of the 77 per cent recovery of investments for shareholders, 71 per cent has been from the sale of assets in the fund, with the redress scheme covering 6 per cent more.
“There appears to be a fundamental conflict between the FCA’s role in protecting consumers and its apparent desire to avoid creating a claim on the FSCS, which would ultimately be borne by the financial services industry via the FSCS levy,” ShareSoc said.
Both the FCA and ShareSoc have recommended that investors study the next steps for the redress offer when released by the regulator in July, and if approved, investors could start to receive compensation in late 2023 or early 2024.
Unwinding the fund
Link’s last update in November last year showed there was £50mn still in the WEIF, after £2.56bn was sent to investors through five payments.
Due to liquidity issues in some of the holdings, Link said the rest of the fund’s value may not be distributed to investors until the end of the year.
Last summer, two law firms joined forces in a claim against Link Fund Solutions over the company’s handling of the Woodford Equity Income fund.
Leigh Day and Harcus Parker submitted a group litigation order at the High Court on June 15 on behalf of more than 3,000 investors in the fund, which collapsed in 2019.
The firms believe the claim will be worth more than £100mn.
