FCA may fine Link Group more than £300 million for collapse of Woodford fund
13 September 2022 UK
Image: Timon
The UK Financial Conduct Authority (FCA) has provided an update on its investigation of the liquidation of the Woodford Equity Income Fund (WEIF), in which it says, by association, Link Fund Solutions (LFS) could be required to pay up to £306 million in penalties.
The update follows announcements made by the wider Link Group in which the company affirmed its potential acquirer, software company Dye and Durham (D&D).
D&D is required to seek FCA approval of the acquisition, as D&D’s proposed takeover of Link Group involves the acquisition of seven firms authorised by the FCA. One of these firms is Link Fund Solutions (LFS), which manages the WEIF.
The FCA has investigated the circumstances leading to the suspension of the WEIF in June 2019, and is likely to seek to require LFS to pay a financial penalty and consumer redress.
However, this is not a final decision, says the FCA, adding: “LFS can challenge any proposed action at the Regulatory Decisions Committee, the FCA’s independent decision maker in contested disciplinary cases, and then through the Upper Tribunal if LFS chooses to exercise its right to do so.”
The authority went on to say: “The redress proposal reflects the FCA's current view of LFS's failures 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 is continuing to investigate matters relevant to the operation of the fund. FCA-determined redress is 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 Link Group, 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.
Given the FCA’s enforcement case with LFS is ongoing, the FCA is not currently able to provide any further information. However, the FCA provided an update on its investigation into the circumstances relating to the suspension of the WEIF in a letter to the Treasury Select Committee in December 2021.
This letter also contains further details on the FCA’s disciplinary process.
The update follows announcements made by the wider Link Group in which the company affirmed its potential acquirer, software company Dye and Durham (D&D).
D&D is required to seek FCA approval of the acquisition, as D&D’s proposed takeover of Link Group involves the acquisition of seven firms authorised by the FCA. One of these firms is Link Fund Solutions (LFS), which manages the WEIF.
The FCA has investigated the circumstances leading to the suspension of the WEIF in June 2019, and is likely to seek to require LFS to pay a financial penalty and consumer redress.
However, this is not a final decision, says the FCA, adding: “LFS can challenge any proposed action at the Regulatory Decisions Committee, the FCA’s independent decision maker in contested disciplinary cases, and then through the Upper Tribunal if LFS chooses to exercise its right to do so.”
The authority went on to say: “The redress proposal reflects the FCA's current view of LFS's failures 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 is continuing to investigate matters relevant to the operation of the fund. FCA-determined redress is 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 Link Group, 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.
Given the FCA’s enforcement case with LFS is ongoing, the FCA is not currently able to provide any further information. However, the FCA provided an update on its investigation into the circumstances relating to the suspension of the WEIF in a letter to the Treasury Select Committee in December 2021.
This letter also contains further details on the FCA’s disciplinary process.
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