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Consumers

Woodford Equity Income Fund investors to have their say

Therese Chambers

Joint Executive Director of Enforcement and Market Oversight

Proposals for redress to go to investors of Woodford Equity Income Fund.

Saturday June 3 2023 will be the fourth anniversary of the Woodford Equity Income Fund being suspended.

I know that if you were one of the estimated 300,000 people who had your savings invested in the fund at the point of suspension, then the most important thing is getting back as much of your money as possible. But I also know you’ll want to understand what went wrong and how we can improve outcomes in the future.

Investigations and operations like this take time. They involve painstakingly looking at large amounts of evidence. To support our work, we’ve issued almost 60 information requests, gathered over 46,000 items of relevant material and interviewed 18 witnesses.

We appreciate that the time taken causes immense frustration, particularly for those with money trapped in the fund. This is a case we need to get right, and there aren’t short cuts to doing that.

Light at the end of the tunnel

But there is light at the end of the tunnel for investors.

In April, we announced a proposed compensation package of up to approximately £235 million for investors who were trapped in the fund when it was suspended.

This would come from Link Fund Solutions (LFS), the authorised corporate director of the fund, responsible for managing the liquidity of the fund. The redress proposed reflects our assessment that those who held investments when the fund was suspended lost out compared to those who got out early. That’s because some of the remaining investments were less liquid and took much longer to sell. Regulation cannot compensate for an investment strategy turning sour – and in this case the strategy was transparent and well disclosed. Risk of loss is the flip side of potential return. Instead, we’ve focused on the unfairness of poor liquidity leading to investors losing out.

Boost to redress scheme

Link Group, the ultimate parent of LFS, has agreed to voluntarily contribute up to £60 million of the £235 million to bolster the redress. This money would not be available to investors through either separate legal action or any other action we, or anyone else, could take. This is despite unrealistic promises that that there could be more money recovered through private litigation.

This redress scheme, together with sales from the suspended fund, means investors will potentially receive back up to 77p in the pound for their losses.

This is the quickest and best way to return as much money to investors as possible compared to other means.

Investors and creditors to vote on scheme

The decision about the redress scheme is rightly down to Woodford investors – a majority of those who vote need to support it for it to go ahead, as well as holders of seventy-five per cent by value of relevant claims. Investors should be given more information in July.

If investors vote in favour of the scheme, this won’t be the end of the story. LFS aren’t the only party under investigation. These continue and we’ll share as much as we can as soon as we can.

And whenever we see consumers losing out because firms haven’t lived up their responsibilities, we’ll continue to fight to get them as much redress as possible.