FCA in ‘advanced’ talks over £306m redress for Woodford investors burnt by fund’s collapse

The Financial Conduct Authority said it is in talks to strike a deal with the manager of Neil Woodford’s collapsed investment fund today to ensure burnt investors can get redress following its collapse in 2019.

In a statement this morning, the FCA said it was in “advanced confidential discussions” with Link Group and its UK arm Link Fund Solutions to win compensation for investors “by agreement”.

It came as Link Group said it was in “exclusive negotiation” with fund service firm Waystone Group over the sale of Link Fund Solutions business excluding “Woodford related liabilities”.

A deal with the FCA would see the firm dodge punitive enforcement action laid out by the watchdog in September that included a proposed penalty of £50m and redress payments for consumers of up to £306m.

In its statement today, the FCA said it is “focused on ensuring that consumers affected by the suspension of the Woodford Equity Income Fund (WEIF) obtain redress.” 

“To assist a potential resolution, the FCA has provided time for Link Group to realise assets, including Link Group held assets, to meet the FCA’s concerns,” the watchdog said, adding that it will “provide a further update as soon as [it] is able to”.

Individual investors were left thousands of pounds out of pocket after formerly famed stock picker Neil Woodford began splashing investors’ cash in speculative bets on unlisted firms. 

Investors rushed to withdraw money from the fund before Link eventually froze withdrawals in 2019, trapping around £3.7bn of investors’ cash.

Link said in a statement that a settlement “would resolve the current FCA investigation”, potentially bringing to a close a four year saga for investors and attempts to recoup their losses.

Link has been the subject of legal action from law firms Harcus Parker and Leigh Day, which collectively represent over 19,000 investors.

The claims filed against Link by the two law firms have set out alleged breaches of rules including “inappropriate levels of investment in illiquid, speculative or hard-to-value stocks”, “an inappropriate investment strategy”, “issues with the valuations of the fund’s assets” and untrue and misleading statements in the investment prospectus.