Financial Conduct Authority
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FCA sets out findings against Link Fund Solutions

Link Fund Solutions (LFS) failed to act with due skill, care and diligence in its management of the Woodford Equity Income Fund (WEIF), according to findings published by the FCA.

The FCA found that between 31 July 2018 and the fund's suspension on 3 June 2019, LFS failed to manage the liquidity of the fund - or how easily assets in the fund could be turned into cash - so that investors could access their money at short notice.

LFS also failed to properly oversee Woodford Investment Management (WIM) or to sufficiently ensure that concerns about liquidity were acted on. In a separate action, the FCA has issued warning notices to Neil Woodford and WIM proposing to take action against them for their conduct in the management of the WEIF.

The FCA has published a warning notice statement about its proposed action against Mr Woodford and WIM. This includes the FCA's allegations that Mr Woodford had a defective and unreasonably narrow understanding of his responsibilities for managing liquidity risks. It also alleges that he and WIM failed to ensure that the WEIF's liquidity risk framework was appropriate, to respond appropriately to the ongoing deterioration in the fund's liquidity, and to maintain a reasonable liquidity profile for the WEIF.

The warning notices given to Mr Woodford and WIM are not the FCA's final decisions and both parties have the right to make representations to the Regulatory Decisions Committee. In the event that the FCA makes final decisions, it intends to make its findings public at the appropriate point, but it cannot provide any further detail beyond the warning notice statement at this stage, including about any proposed sanctions.

The LFS final notice confirms the failings which led to the FCA's investigation and subsequent agreement from LFS to settle the enforcement case and provide compensation to those affected. Those invested in the WEIF when it was suspended are starting to receive a share of the up to £230 million redress scheme, which was approved by the High Court in February.

The FCA has also confirmed that there are no other parties under investigation in relation to the Woodford Equity Income Fund.

Therese Chambers, joint executive director of enforcement and market oversight, said:

'Link Fund Solutions' job was to properly manage the Woodford Equity Income Fund and to protect investors' interests. Their failings led to losses for those trapped in the fund when it was suspended.

'It is right that they compensate investors for the losses that resulted from their failings, and we're pleased that the scheme has started making payments.'

Notes to editors

  1. Final Notice 2024: Link Fund Solutions Limited
  2. Warning Notice Statement 24/3
  3. The FCA believes that LFS breached Principle 2 (skill, care and diligence) and Principle 6 (fair treatment of customers) of its principles for business.
  4. The FCA would have imposed a fine of £50m on LFS (which would have been reduced to £35m in the case of settlement). However, imposing this penalty would reduce the amount which consumers receive back.
  5. Warning notices are issued by the FCA's Regulatory Decisions Committee (RDC). They are a notice that the FCA proposes to take enforcement action. Following the issuing of a warning notice, the individual or firm has a right to respond by making written and oral representations to the RDC.
  6. If appropriate, the FCA will publish a warning notice statement with a brief summary of the facts. These usually only name firms. However, individuals may be named in certain circumstances, including where it is not possible to describe the nature of the FCA's concerns without making it possible to identify the individual, or it is necessary to maintain public confidence in the financial system or market.
Channel website: https://www.fca.org.uk/

Original article link: https://www.fca.org.uk/news/press-releases/fca-sets-out-findings-against-link-fund-solutions

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