Hargreaves Lansdown is being hit with legal action over the collapse of the Woodford Equity Income fund, the first lawsuit aimed at the FTSE 100 firm over the debacle.
Specialist litigators RGL Management has formally issued action against both Hargreaves Lansdown and Link Fund Solutions, the authorised corporate director of the since renamed fund.
So far 2,000 investors have joined this particular legal action and RGL expects the total value of the claim to be in excess of £100m.
According to some analyses, investors in the Woodford Equity Income fund will have lost about 20.8 per cent of their money if they invested at the fund's launch, while investors who backed Woodford at the fund’s peak, in June 2017, will be facing a loss of about 43 per cent.
Several firms are taking legal action on behalf of investors in Woodford Equity Income, but until now that action had been aimed at Link.
The RGL lawsuit is the first to formally involve Hargreaves Lansdown - though law firm Slater & Gordon is still investigating whether to do so.
Hargreaves Lansdown is being targeted as it continued to recommend the Woodford Equity Income fund in its best buy list right up to the day of its collapse, despite awareness of the portfolio’s liquidity issues.
Meanwhile, Link is being sued due to its alleged failure to appropriately administer and manage the fund.
Letters before action have been issued to both parties by RGL, marking the start of the legal process.
These claims will centre around direct losses from the collapse of the fund as well as “loss of opportunity losses”, relating to investors missing out on other investments that would have generated positive returns.
RGL has instructed Wallace LLP, a specialist commercial law firm, led by partner Alexander Weinberg to act on behalf of claimants, with Alain Choo-Choy QC of One Essex Court Chambers acting as counsel.
Up to 300,000 investors are believed to be stuck in the fund and RGL is urging more claimants to come forward.
“Those investors who suffered due to the terrible mismanagement of the WEIF deserve to be compensated,” said James Hayward, chief executive of RGL Management.
“In bringing an action against both Link and Hargreaves Lansdown, RGL offers the best chance of a full recovery of losses for [Woodford Equity Income] investor claimants, as well as the most competitive offer for investor recovery of any claim on the market.
"We urge anybody who invested in the [Woodford Equity Income], no matter how little, to visit our website and register with us at no financial risk to recover the compensation they are owed.”
So far Harcus Parker, Leigh Day and RGL are taking legal action over the Woodford debacle.
The Woodford Equity Income fund collapsed after it began facing outflows running at £9m a day but its holdings were too illiquid to meet these redemption requests, which had been prompted by poor performance.
When Kent County Council asked to withdraw all of the £250m it had invested with him through its pension fund and Kier Group, one of the fund's substantial holdings, announced a profit warning which prompted its shares to plummet by 40 per cent, the fund was suspended.
Link ultimately closed the fund several months later, which prompted Woodford Investment Management to close.
Hargreaves Lansdown declined to comment.
