FCA flags 'likely' £306m Woodford Fund fine amid Link Group takeover

The City watchdog revealed the likely outcome of its probe into the collapsed Woodford Fund late on Monday, as part of its investigation into the planned takeover of its administrator, Link Group.

As part of its takeover plans, Toronto-listed Dye and Durham (D&D) was required to seek approval to take control of a number of firms authorised by the Financial Conduct Authority (FCA).

That included Link Fund Solutions (LFS), which managed the LF Woodford Equity Income Fund (WEIF).

The FCA said it had investigated the circumstances leading to the suspension of Neil Woodford’s flagship fund in mid-2019, and was likely to seek to require LFS to pay a financial penalty or consumer redress.

“The FCA’s current view is that the redress payment LFS could be required to pay may be up to £306m,” the watchdog said in its statement.

“This redress proposal reflects the FCA's current view of LFS' failings in managing the liquidity of the WEIF.

“It does not reflect any amount which may be owed to anyone else, including members of the fund, as a result of potential wrongdoing by other parties.”

The FCA said it was continuing to investigate matters relevant to the operation of the fund, adding that any redress determined would be based on misconduct, rather than losses caused by fluctuations in the market value or price of investments.

“The FCA has therefore decided to approve D&D’s acquisition of LFS, subject to a condition to commit to make funds available to meet any shortfall within LFS in the amount available to cover any redress payments LFS may be required to make.

“This is the only condition the FCA has decided to impose to allow D&D to take control of the seven UK-authorised firms.

“The FCA has approved a change in control for the other six UK-regulated entities owned by Link Group.”

Given the FCA’s enforcement case with LFS was ongoing, it said it was not currently able to provide any further information.

“The FCA understands that investors will be keen to understand the impact that this may have on them, including any potential to receive redress, and will provide an update as soon as it is able to do so.”

Reporting by Josh White at Sharecast.com.