Hargreaves Lansdown Group  

Hargreaves Lansdown hit by Woodford lawsuit as CEO resigns

Hargreaves Lansdown hit by Woodford lawsuit as CEO resigns

Hargreaves Lansdown has been hit by a lawsuit over allegations it recommended the Woodford Equity Income Fund to investors, despite knowing about the liquidity issues facing the vehicle.

RGL Management, a claims management firm, has lodged a group litigation against Hargreaves Lansdown on behalf of thousands of investors who lost money when the fund collapsed in 2019.

The case alleges that Hargreaves’ senior management knew about liquidity issues in Woodford’s fund in November 2017, despite recommending it to investors until the day it was suspended on June 3, 2019.

Article continues after advert

Hargreaves’ chief executive Chris Hill, who announced his retirement this morning, has previously said the company urged Woodford to change his strategy after the fund manager began increasing the fund’s exposure to small and unquoted assets.

The fund remained on Hargreaves’ list despite an extended period of poor performance and Hargreaves has since confirmed it had concerns about the fund for 18 months before its eventual suspension.

Wallace, the law firm hired by RGL Management, has claimed that Hargreaves was not “reasonably justified” in continuing the promote the fund, had “no reasonable grounds” for its belief that the fund should be included in its best buy list, and it failed to keep its clients reasonably informed about the company’s own concerns about the fund.

The case is being pursued on behalf of anyone who invested in the fund through the Hargreaves Lansdown platform, or indirectly through the Hargreaves Lansdown Multi Manager Fund, as well as any investors who did not invest through the company.

Fund collapse

As the authorised corporate director of Woodford Investment Management, Link has been under investigation by the FCA since the collapse of the Woodford Equity Income Fund.

The fund, once worth £10bn, began struggling with a wave of redemption requests in 2019.

After a scramble to sell shares to improve the fund’s liquidity, Link announced in October of that year that the fund would be wound down and Neil Woodford fired. 

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

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.

Link

RGL is also suing Link Fund Solutions, the authorised corporate director of the fund, over its responsibilities of how the fund was operated, promoted and sold to investors.

Link is already the subject of a lawsuit by legal firms Leigh Day and Harcus Parker on behalf of more the 3,000 investors in the fund.

The firms considered taking up the case against Hargreaves Lansdown but ultimately decided solely to pursue Link as a simpler way to recover investors’ money, according to the Financial Times.

The Financial Conduct Authority has recently said Link could be fined £50mn and forced to pay £306mn in redress as part of the regulator’s enforcement process.