One of five companies seeking compensation for investors who lost money in liquidation of the Woodford Equity Income mutual fund is expected to launch a multi-million pound class action lawsuit by the end of the year.
Sunday's mail revealed that litigation specialist Harcus Parker is likely to be the first to hit the go button with a lawsuit against Link – the Fund's Authorized Corporate Director (ACD). It is understood as being "below" rivals RGL Management, Nelsons, Slater, and Gordon and Leigh Day.
Harcus believes Link has failed to perform its duties as an ACD to safeguard the interests of the Fund's 300,000 investors, which resulted in the sudden closure of the £ 3.5 billion fund in June last year when it was unable to fulfill a multi-million pound redemption request from a major investor.
In Search of Justice: Many investors in Neil Woodford's funds have suffered losses of up to 50 percent
Manager Neil Woodford was then dismissed by Link, the fund liquidated and much of the assets sold, with the money returned to the investors. However, many investors suffered losses of up to 50 percent.
Harcus claims Link failed to ensure the fund had enough liquidity to meet investor redemptions – which led to its sudden shutdown. Link also failed to review the valuation of some of the Fund's unlisted assets that were later sold for a small amount when Woodford Equity Income was liquidated.
Eventually, Link is accused of failing to ensure that Neil Woodford ran the fund on its mission – to provide investors with a mix of dividends and return on investment from a portfolio of well-established UK companies. Instead, the fund was heavily invested in unlisted companies.
On Friday, Harcus confirmed he has the resources to file his lawsuit, received a positive opinion on the rationale for his lawsuit from a senior Queen's attorney, and set out his reasoning to Link in the correspondence – a document The Mail on Sunday has seen.
It added, "The lawsuit continues and we expect to be filing on behalf of several thousand customers soon." Around 15,000 investors have expressed an interest in supporting the claim, 3,000 of which became Harcus customers. Their numbers will increase if Harcus pursues the claim – aggrieved investors can join them up to a deadline set by the court (woodfordclaim.com). The promotion is carried out with no profit and no fee.
Harcus' move is welcomed by Woodford investors as the litigation expert has taken successful action in the past. It was prosecuting Link & # 39; s predecessor Capita Financial Managers in court over his role in the collapse of the Arch Cru funds – and reportedly forcing Capita to reach an out-of-court settlement in 2015.
Interestingly, the Queen's Counsel's opinion on Link is the same as that of the Lead Counsel used in Arch Cru – Nick Vineall QC. Capita's roles at Arch Cru were broadly the same as those at Link on Woodford Equity Income.
Investors need to be patient. Once launched, the class action lawsuit would take at least 18 months to go to court. A judgment in both cases could then take between two and three months. If Harcus is successful, it is unlikely that any compensation will be paid before the end of 2022. Aside from Harcus & # 39; intervention, there is still the possibility of regulatory intervention in the Woodford debacle. The Financial Conduct Authority has been investigating the circumstances surrounding the high-profile fund's closure for the past 17 months – and continues to do so. According to Peter Sleep, a fund manager at Seven Investment Management, investors hoping for compensation through FCA intervention must likely have the "patience of a saint".
He says it took five years for regulatory action against Capita Financial Managers (now Link) to surface for their role in liquidating the Connaught Income Fund.
The result was a payment of £ 66 million to investors (from Capita) who had lost money in the failed fund – plus public censorship for Capita.
There are similarities between Connaught Income and Woodford Equity Income – in terms of the failure of the authorized company director (Capita in Connaught & # 39; s case, Link & # 39; s in Woodford & # 39; s) to adequately oversee the fund.
But, as Sleep says, “Nothing is ever exactly the same, but there may be other issues that the FCA is uncovering with Woodford Equity Income. The wheels of justice are turning slowly and I can only imagine Covid throwing sand in those wheels today. & # 39;
On Friday, the FCA said the investigation into the Woodford Equity Income suspension was a "priority". It added, "There's a strong team working on it full time and we're trying to get it done asap." It confirmed that Link was part of his job. Although Harcus is focused on Link, other litigation firms have targeted asset manager Hargreaves Lansdown, who was promoting the fund as a “Best Buy” – and millions of pounds in sales for himself – by the day Woodford Equity Income closed generated. This is despite concerns about the increasingly illiquid nature of the fund.
CASE STANDS & # 39; HIGH CHANCE OF SUCCESS & # 39;
Alan Miller, chief investment officer of wealth manager SCM Direct, has been following the debacle surrounding the Neil Woodford-managed funds.
In fact, he was one of the first to predict that many of the investments in the Woodford Equity Income Fund were grossly overvalued and near worthless.
He raised his concerns directly with the Financial Conduct Authority – and it has been proven correct. He says class actions have "a very high chance of success" – adding, "I think there will be substantial claims against Hargreaves Lansdown and Link, ironically not against Mr. Woodford or his company Woodford Investment Management."
There is also the possibility that an institutional lawsuit will be filed against Link – supported by pension funds that have invested in Woodford Equity Income.
Harcus Parker is looking into this, but it is difficult because many institutional investors are unwilling to enter into what they consider to be "chaotic and vulgar" litigation.
One expert believes that Hargreaves Lansdown should go along with such a request so that investors in private label managed funds, some of which have been heavily invested in Woodford, have an opportunity to offset some of their losses.
On Friday, Link and Hargreaves Lansdown were invited to comment on the prospect of litigation.
They declined the opportunity.
THE FOUR OTHER COMPANIES THAT ACT LAW
RGL MANAGEMENT: RGL's main target is Hargreaves Lansdown, although it is still "very serious about adding link to the claim". Like Harcus, Queen & # 39; s Counsel has asked for comment on the rationale for a claim and the response has been "excellent".
On Friday, James Hayward, CEO of RGL said, “We have over 1,000 applicants and this is before a formal marketing campaign has started. In reality, we won't make a claim until next year. & # 39;
Hayward admitted that his company might not be the first to file a lawsuit, but noted that "no one had beaten them" to bring a class action lawsuit against banks in Yorkshire and Clydesdale for badly selling business loans in the 2000s Years to raise. "We have the expertise and the gravity," he added. rglmanagement.com/woodford-litigation
LEIGH DAY: Like Harcus Parker, Leigh Day believes that a case against Link is the best way forward. It told The Mail on Sunday that it was in the "final stage of preparation" before opening the case. Each promotion would be based on a no-win-no-fee basis with fees capped at 30 percent of the compensation received.
Kamran Vojdani, attorney on the Leigh Day consumer rights team, said, “The time to prepare the case reflects the size, complexity and evolution of this matter. Additionally, we want to make sure that everything is in place to bring the claim to court so we don't have to disappoint customers later. & # 39;
He added that "potential claims against Hargreaves Lansdown have been examined separately". Consumerlawclaims.leighday. co.uk.
NELSONS: This firm intends to bring claims against both Link and Hargreaves Lansdown – and advise some investors on additional claims against their independent financial advisers who recommended the Woodford Fund to them. On Friday, partner Cathryn Selby said, “We have collected evidence of ongoing claims – and investigated new potential claims while those affected continue to come forward.
"We are in the process of closing the claims, so anyone wishing to pursue a claim should act quickly as we expect formal letters of claim to be issued before the end of the year." nelsonslaw.co.uk/ woodford-fund-claim
SLATER AND GORDON: It follows RGL in pursuit of Hargreaves Lansdown. On Friday. Gareth Pope, Slater and Gordon's principal attorney, said, “We believe investors have a viable claim against Hargreaves Lansdown and we pledge to hold them responsible for the losses that investors have suffered.
"Slater and Gordon have formed a team of attorneys and professional advisors and are in the process of launching group action against Hargreaves Lansdown so that all investors can reclaim their investment and other losses suffered." slatergordon.co.uk
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