Link facing £50m fine in Woodford probe

Link Fund Solutions is facing a £50m fine for its role in the collapse of the Woodford Equity Income Fund, the UK's financial watchdog confirmed on Wednesday.

The penalty comes on top of a potential £306m in redress payments that LFS could also have to pay.

UK-based LFS, which is owned by Australia’s Link Group, managed Neil Woodford’s £3.7bn WEIF until its collapse in June 2019. Woodford restricted withdrawals after values started to tumble, leaving investors unable to access their money. The fund was finally closed in October 2019, and Woodford - a former star stock picker - was widely criticised for holding illiquid assets that made it hard to meet redemption calls following months of underperformance.

The FCA launched an investigation and on Monday issued a draft warning notice stating that LFS could be liable for redress payments of up to £306m, reflecting its "current view of LFS’s failings in managing the liquidity" of the WEIF.

But it has since confirmed that the draft warning notice also includes an additional penalty of £50m.

The FCA said issuing the draft warning notice was a "normal step" in the enforcement process, and afforded the recipient with 14 days to resolve the case "by agreement".

It added: "The FCA’s priority is to protect consumers and the integrity of the UK financial system. With the investigation into LFS complete, it is right to progress it by issuing the draft warning notice.

"The FCA is focused on ensuring that the right funding is in place so affected consumers are able to access as much redress as possible."

In August, Link Group agreed to be acquired by Canada’s Dye & Durham for A$2.47bn. But the deal was cast into doubt after D&D slashed the price to $1.95bn, following the FCA’s announcement that Link could be required to pay redress of £306m.

Link responded by saying it could not recommend the lower offer and would instead "evaluate alternatives for the business".

Ryan Hughes, head of investment partnerships at AJ Bell, said: "This is not a final decision, and Link have the opportunity to respond and challenge the FCA’s findings. It is also clear that further investigations are continuing, with the FCA noting that multiple parties remain under investigation."

But he added: "With this news coming so soon after the potential £306m redress announcement, investors impacted by the WEIF saga will be increasingly hopeful that this sorry episode is getting closer to completion."