What does the FCA’s update on the Woodford fund investigation mean for investors?

The FCA’s latest update to the Treasury Select Committee about its investigation into events surrounding the collapse of the Woodford Equity Income Fund, published this week, emphasised once again the significant amount of time required for an FCA investigation of this nature.

It is clearly important that the official investigation is allowed to run its course. However, the FCA’s letter and the significant amount of work still to be done before we are likely to see any public disciplinary sanction against those involved or redress will be of little comfort to the thousands of investors who lost out from the fund’s collapse, and who deserve a swift resolution.

Update from the FCA

On 15 December, the FCA wrote to Treasury Select Committee Chairperson, Mel Stride MP, regarding its investigation into events surrounding the 2019 collapse of the Woodford Equity Income Fund (now named the LF Equity Income Fund). The FCA confirmed it has now gathered all key evidence, instructed an expert witness to provide an opinion, and engaged legal counsel to assist in the evaluation of evidence. It remains on track to conclude its investigation by the end of 2021, it said.

However, although this may now be completed there is still more to be done before any outcome is made public. The subject(s) of the FCA investigation will be given time to respond to any allegations and to contest the FCA’s proposed sanctions.  The subject(s) then have a further right of appeal to an independent body if they are unsuccessful in contesting any outcomes they disagree with. 

Publicly, nothing has yet been revealed about the precise targets for any disciplinary action, which could include Neil Woodford himself, Woodford Investment Management as the fund’s Investment Manager, Link Fund Solutions Ltd (Link), the fund’s Authorised Corporate Director, or indeed all of the above. The nature of any disciplinary action also remains a mystery.

The FCA letter also reminded the Select Committee of the length of additional time it will take to reach an outcome if the FCA’s proposed regulatory sanctions are contested.

What does this mean for investors?

Based on this letter, we are unlikely to hear anything about the outcome of the FCA’s investigation and any subsequent disciplinary action for many months.

Mel Stride has recognised the need for speed, and responded to put some pressure on the FCA to “…ensure as swift as possible a conclusion”.  

Investors who are hoping for a swift resolution from the FCA may be in for a long wait.

Alternative options for redress for investors

Leigh Day is bringing a civil group claim in the High Court, claiming compensation for the investors in the fund who have lost significant amounts. The claim is against Link, the fund’s Authorised Corporate Director. 

Link was responsible for ensuring that the fund complied with all FCA regulations and investment restrictions that are designed to protect investors. We believe that it was Link’s failure to their job to challenge the investment decisions made by Neil Woodford and ensure that the fund had an appropriate spread of risk that led to investors suffering such significant losses.

Whilst the FCA’s investigation is important and we look forward to seeing the outcome of it, in our view the group claim Leigh Day is bringing is the best option for timely redress for investors. 

We are focused on securing compensation for our clients as quickly as we can. The case is progressing, and investors can expect to see further significant developments in the coming months.

If you invested in the Woodford Equity Income Fund please visit our website to find out more about Leigh Day’s group claim.