Link Financial Services (LFS) has been given 14 days to appeal a £50m fine from the FCA over its failure to manage the liquidity of the now-defunct Woodford Equity Income Fund (Weif).
The proposed penalty is the latest move by the UK watchdog to bring to a close a saga that has been running since Neil Woodford’s (pictured) fund was gated in 2019.
The £50m is in addition to the £306m in redress payments the UK watchdog demanded earlier this month be set aside by LFS’s parent company, Link Group, before it will give final approval to the proposed takeover of the firm by Canada-based outfit Dye & Durham (D&D).
AJ Bell’s head of investment partnerships, Ryan Hughes said it “hopefully indicates that the investigation is now moving towards its final phases”.
See also: Woodford pulls the plug on UK comeback venture
A normal step in the process
In an announcement on the Australian Stock Exchange (ASX) on Tuesday, Link Group confirmed that the FCA had issued a draft warning notice to LFS on 20 September 2022 in respect of the Woodford investigation. “The FCA has assessed the appropriate penalty as £50m—prior to taking into account any available discount—in addition to a restitution payment of £306m.”
On Wednesday, the FCA described the draft notice as “a normal step” in its enforcement process which “provides a recipient with an opportunity to resolve the case by agreement”.
Link Group said that LFS “will explore all options, including engaging in settlement discussion with the FCA”, but added that its subsidiary is prepared to challenge any decision and launch an appeal with the upper tribunal.
Even if LFS agrees to pay the £50m penalty, plus set aside the £306m in restitution, that would not necessarily see the Woodford investigation come to a close.
The FCA said: “There are multiple parties under investigation in relation to the circumstances that led to the suspension of the LF Woodford Equity Income Fund. These investigations continue and they will consider any further failing which may have negatively impacted investors.”
Dzmitry Lipski, head of funds research, Interactive Investor, commented: “The drip, drip, drip of information over the past several days is a curious way to conduct a major investigation after three years of silence.
“Many questions remain unanswered, the issue of redress is far from certain, and wider investigations are still ongoing. The answers that investors have long awaited have essentially been front run by a potential deal. Investors deserve better.”
Hughes added: “The FCA’s statement makes it clear that this notification is not a final decision and Link have the opportunity to respond and challenge the FCA’s findings so there may be further detail to come. It’s also clear that further investigations are continuing with the FCA noting that multiple parties remain under investigation as it continues to look at any failings which may have negatively impacted investors.
“With this news coming so soon after the potential £306m redress announcement, investors impacted by the Woodford Equity Income fund saga will be increasingly hopeful that this sorry episode is getting closer to completion. After three long years, investors have waited patiently for the FCA to unearth what went wrong and hopefully put in place some form of compensation for investors. It now seems like they might finally be getting somewhere.”
See also: Shrivelling valuations make grim reading for trapped Woodford investors