The Authorised Corporate Director (ACD) responsible for the Woodford Equity Income fund (WEIF), Link Fund Solutions, has dismissed claims it failed in its role and said it had "at all times acted in accordance with applicable rules and in the best interests of all investors".
Link, which has been associated with previous high-profile fund closures, has been under fire from regulators, politicians and the wider investment industry for its part in the suspension of WEIF, which ultimately led to the demise of the fund and Woodford Investment Management.
Critics, including former chair of the Treasury Select Committee Nicky Morgan MP, allege Link's involvement as an ACD may have had "holes in the process" amid claims from industry commentators they could "get away with it again" at another fund house.
In a statement, the firm said: "[Link] considers that it has at all times acted in accordance with applicable rules and in the best interests of all investors of the fund and it will continue to do so."
One of the most controversial elements in the events leading up to WEIF's closure was the decision to list illiquid assets on Guernsey's The International Stock Exchange (TISE) in efforts to circumvent UCITS liquidity rules.
The Link spokesperson said the ACD had no part in the decision or "the investment strategy of the fund".
They added: "[Link] does not determine where issuing companies decide to list or which exchange to be quoted on. It is responsible for determining, in conjunction with the depositary, whether a market or exchange is eligible in accordance with [regulations].
"[Link] did not have, and nor would it have expected to have, input into the decisions taken by individual companies to list on the TISE."
'They will get away with it again'
The decision to wind up WEIF marks the third controversial fund closure associated with Link, the previous two having occurred under Capita Financial Managers (CFM), which it purchased in 2017.
CFM was the ACD of specialist investment vehicle Arch Cru and property scheme Connaught at the time of their respective collapses, the latter of which is still under review by the Financial Conduct Authority (FCA).
The regulator also has an ongoing investigation into the role of ACDs and the "conflict of interest" at the heart of their relationship with investment managers.
In 2012, the FCA's predecessor the Financial Services Authority (FSA) publicly censured CFM for failing to protect investors in the Arch Cru funds between June 2006 and March 2009.
The regulator said at the time: "Capita Financial Managers has major responsibilities in relation to funds holding a very significant amount of investors' monies.
However, its performance in relation to the CF Arch Cru funds fell well short of the FSA's requirements."
Woodford and Arch Cru's funds both held a greater percentage of illiquid holdings than is typically permitted.
Arch Cru's private equity holdings were held in cell structures listed on the Channel Islands Stock Exchange.
The scandal, which is estimated to have cost investors £10m, also saw CFM attempt to make financial advisers jointly liable when they were sued by over 1,000 investors following the collapse. They later settled out of court.
Not long after, The Connaught Income Series 1 fund collapsed, with CFM acting as ACD once again.
The fund provided short-term financing to UK property businesses and lost investors £118m when it went into liquidation in December 2012.
In 2017, CFM were ordered to pay up to £66m to investors, but the FCA stopped short of imposing a fine, as CFM would be unable to pay both. There were no permissions removed nor any action taken against any individual involved.
The head of the Connaught Action Group, Mark Bishop, claims this is tantamount to having "bought themselves exoneration".
He said: "They have failed three times now and the total value of consumer losses is in nine figures.
"I think they will get away with it again."
When CFM was bought by Link in 2017, its chief executive Chris Addenbrooke, finance director Ben Hammond and relationship management director Karl Midl also moved across and remain with the firm to this day.
'Holes in the process'
In the wake of the Woodford (pictured) demise, Wellian Investment Solutions CIO Richard Philbin said there are questions to be asked of Link's role.
He asked: "What did [Link] do? How capable are they when it comes to interrogating a fund, fund manager or investment process?
Philbin noted that while the "inner workings" of Link's relationship with Woodford were unclear, it raised the question of "holes in the process".
Much like Arch Cru, Woodford's fund invested more heavily in illiquid assets than regulators allow, with 85% of its net asset value invested in illiquid securities, according to analysis from MSCI.
While Link denies its involvement in the decision to list illiquid assets on TISE, managing director at Tilney Investment Management Services Jason Hollands said there are questions to be asked as to "whether they were too slow to act…[particularly with regard to the] eyebrow raising… decision to list certain unquoted holdings on TISE".
Hollands also noted the "controversial share swap of certain unquoted holdings in WEIF with Patient Capital", which also "happened under their watch".
He added: "Their final decision to pull the plug on the fund has not been universally well [received] by investors either, who were never consulted on this course of action."
CFM and Link: A timeline
Mar 2009 Arch Cru funds officially suspended
Nov 2012 FSA public censure against CFM in relation to Arch Cru
Dec 2012 Connaught enters liquidation
Nov 2017 Link formally completes acquisition of CFM
Nov 2017 CFM publicly censured and ordered to pay £66m to Connaught investors by FCA
Oct 2019 Link announces WEIF to be wound up, following June suspension
Brooks Macdonald has bought Edinburgh-based wealth and asset manager Cornelian Asset Managers for a fee of up to £39m.