The administrator of the failed fund run by the former star stock-picker Neil Woodford could be forced to pay investors up to £306m in compensation, the City regulator has said.
The Financial Conduct Authority said on Monday it was ordering the fund’s administrator, Link, to ringfence the sum as part of conditions related to Link’s takeover by the Canadian cloud-based software company Dye & Durham.
The money could eventually be used to help compensate the 300,000 investors who were affected by the collapse of Woodford Equity Investment Fund (WEIF) three years ago, including those who lost their life savings after its failure. It is the first time the regulator has revealed any penalty related to the fund’s collapse.
Link was responsible for monitoring and supervising the investments executed by Woodford before the fund failed in October 2019.
The regulator said on Monday evening it was likely to force Link Fund Solutions (LFS) to pay a “financial penalty and/or consumer redress” as part of its investigation into WEIF’s suspension and eventual collapse.
“The FCA’s current view is that the redress payment LFS could be required to pay may be up to £306m. This redress proposal reflects the FCA’s current view of LFS’ failings in managing the liquidity of the WEIF,” it said in a statement.
“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 City regulator stressed the figure was provisional and that Link could challenge any financial penalty the FCA levied.
Woodford’s equity fund was worth more than £10bn at its peak, but suffered from several poorly performing investments in companies including the estate agent Purplebricks, the finance firm Burford Capital and the doorstep lender Provident Financial.
That string of bad bets, combined with Woodford’s decision to put money in a number of private unlisted companies that were harder to sell, led to the fund’s suspension and eventual collapse. The administrator has since wound down the fund and returned money to many investors at a steep loss.
Link is separately facing a spate of private legal cases from investors who hope to recoup millions of pounds from the administrator, which they claim failed in its duties to monitor the financial risks and the liquidity of the fund. Link has previously said it would vigorously defending itself against the legal challenge.