Law firm considers compensation claims against Link over Woodford collapse

Link, which today (5 June) also announced it had agreed to sell a significant portion of the fund's remaining assets, held an important role in oversight and investor protection in its role ACD of the fund, which first suspended a year ago this week.

The WEIF affair has led to separate legal challenges, with law firms Leigh Day and Slater & Gordon seeking compensation for investors in the former Woodford fund.

To date, Leigh Day have been contacted by over 3,000 former WEIF investors and the firm has confirmed that investigations into both Link and Hargreaves Lansdown are "ongoing", while Slater & Gordon also confirmed that they are investing claims into Link regarding its "obligation to investors" and its "actions following the Woodford fund collapse". 

Nelsons, which has also been representing investors pursuing legal action against Hargreaves Lansdown for its continued promotion of WEIF despite underperformance, has now said the law firm's investigations had raised "significant questions" about the ACD.

Link has faced widespread criticism for its role in the collapse of WEIF and has been accused of "falling asleep" at the wheel over its role in overseeing its suspension. 

Critics, including former chair of the Treasury select committee Nicky Morgan, 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 its role as ACD, Link is supposed to ensure funds stick to the rules. In Woodford's case, that included making sure the flagship fund stayed below its limits on illiquid holdings.

It was responsible for valuing the unquoted securities in the fund and was heavily involved in both Woodford's attempts to list some of his holdings on the Guernsey Stock Exchange and the transfer of its unquoted assets to Woodford Patient Capital.

Neil Woodford himself was highly critical of the ACD, describing its decision to wind up the Woodford Equity Income fund as one he "cannot accept, nor believe is in the long-term interests of…investors".

However, Link told Professional Adviser's sister title Investment Week in November that it had "at all times acted in accordance with applicable rules and in the best interests of all investors".

However, partner and head of Nelsons' dispute resolution team Cathryn Selby, who specialises in professional negligence claims, accused Link of a "failure to address at a much earlier stage the substantive issue of the increasing illiquidity of the fund".

She added: "This will have affected anyone who invested in the fund, particularly those who did so after December 2017 as they may well say their losses could have been avoided had Link Fund Solutions done its job properly.

"[Link] had a fiduciary role and a regulatory obligation to ensure that the Woodford Equity Income fund was run in the best interests of investors, ensuring they were protected and treated fairly."

Specifically, Selby pointed to the controversial listing of unquoted companies on Guernsey's International Stock Exchange, which allowed Woodford to circumvent fund liquidity requirements.

She added: "Link… was involved in the decision to designate The International Stock Exchange as an eligible market for these purposes, which allowed the initial listings of the shares to take place.

"We are looking at whether such decisions were indeed in the best interests of all investors, or whether it could be said that investors were let down by Link Fund Solutions' apparent failure to address the substantive issue of the increasing illiquidity of the fund at a much earlier stage."

Encouraging investors who wish to claim compensation to come forward, Selby the winding up of WEIF and the closure of Woodford IM has "sent shockwaves through the financial landscape, leaving many dissatisfied clients seeking legal advice as more information comes to light".

She added: "People are now beginning to see the real extent of their losses, and with the current state of the economy due to the coronavirus pandemic we're in the midst of, the outlook for those investors is looking worse and worse as time goes on.

"It is possible that the value of the assets left in the fund will continue to fall in value as a result."

Link declined to comment.

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• Topics
• Investment
• Neil Woodford
• Leigh Day
• ACD
• Woodford
• Hargreaves Lansdown
• Treasury Select Committee Nicky Morgan
• Guernsey Stock Exchange
• Woodford Patient Capital
• International Stock Exchange
• Woodford IM
• UK
• UK Equity Income