Law firms join forces on £100mn Woodford compensation claim

Leigh Day and Harcus Parker have today (June 15) submitted a group litigation order at the High Court on behalf of more than 3,000 investors in the fund, which collapsed in 2019.

The firms believe the claim will be worth more than £100mn.

Both companies had previously begun court proceedings against the fund’s authorised corporate director - Leigh Day in September last year and Harcus Parker last month.

The joint claim will allow the firms to share resources.

Daniel Kerrigan, senior associate at Harcus Parker, said: “We know that investors have been waiting for far too long for compensation and we are confident that working together we will deliver a positive resolution for our clients as soon as possible, starting with the first court hearing in this case in the Autumn. 

“We invite all investors who have not signed up to the claim to do so.”

The case is expected to go to court in October.

Details of the claim

The claim alleges that Link breached the FCA’s rules in its performance as the authorised corporate director of the Woodford Equity Income Fund, saying it failed to ensure that the fund was managed in accordance with the Collective Investment Schemes sourcebook of the FCA handbook.

The claims are being brought under the Financial Services and Markets Act which allows private individuals to claim compensation from a body authorised by the FCA if it breaks the regulator’s rules.

The claim alleges that Link broke the rules in allowing inappropriate levels of investment in illiquid, speculative or hard-to-value stocks, as well as an inappropriate investment strategy, issues with the valuation of the fund’s assets and untrue and misleading statements in the fund prospectus.

The law firms said the breaches caused the claimants to suffer loss resulting from the underperformance of the fund, as well as from the suspension of the fund and the overvaluation of shares in the fund.

The claim continues that, if Link had not breached the rules, the fund would not have been suspended in June 2019 and the claimants would not have been locked in.

A spokesperson for Link said it has not yet been served with any proceedings, and it will "vigorously defend itself" in such an event.

“A key responsibility of Link...was and is to act in the best interests of all investors in the [fund]," they said.

"Link takes this and its other responsibilities very seriously and considers that it has acted at all times in accordance with applicable rules, as well as in the best interests of all investors, and it will continue to do so.”

The FCA declined to comment.

Woodford: What happened?

The poor performance of Neil Woodford's flagship Equity Income fund meant it had been struggling with outflows which were running at a net £9mn per working day in May 2019.

Then on June 3 Kent County Council asked to withdraw all of the £250mn it had invested with the manager through its pension fund. This triggered the fund's suspension.

Following this Woodford scrambled to sell shares to improve the fund's liquidity in an effort to preempt a wave of redemptions when the fund reopened.

But on October 15 Link Fund Solutions, the authorised corporate director of the fund, announced it would be wind down the fund and it fired Woodford.

Later that day Woodford walked away from his other two investment vehicles and confirmed he had taken the decision to close Woodford Investment Management.

Thousands of investors saw their money trapped in the suspended fund and lose considerable sums as a result.

At its peak the fund was more than £10bn in size but at the point of its suspension, the fund was £3.5bn in size - though it had shrunk to £2.9bn by the time capital started being repaid.

So far £2.5bn has been paid out as the fund gradually sells its holdings, with investors still waiting for £140mn to be returned.

sally.hickey@ft.com