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Two law firms pursuing cases on behalf of investors in Neil Woodford’s collapsed fund will ask a UK court for permission to form a “unified front” to present claims for compensation that could reach several hundred million pounds.
Leigh Day and Harcus Parker have each filed claims against Link Fund Solutions, the administrator of Woodford’s flagship Equity Income Fund. They argue investors are due compensation because Link failed to oversee the fund properly, leading to its collapse.
The two firms said they would seek an order from the UK High Court on Wednesday to be appointed co-lead solicitors for a joined-up case, meaning they could pool resources and make a single argument on behalf of their 2,500 clients.
Link has denied the claims. The company has said it “considers it has acted at all times in accordance with applicable rules, as well as in the best interests of all investors, and it will continue to do so”.
The firms’ decision came just over three years after Link froze the Woodford fund, then valued at £3.7bn, leaving savers unable to withdraw their money. Prior to the collapse, Woodford had built a reputation as a star stock picker with a devoted following among small UK investors.
The law firms allege Link breached Financial Conduct Authority rules by allowing Woodford to invest too heavily in stocks that were hard to value and difficult to sell quickly when investors asked for their money back. Funds typically keep enough liquidity to make sure that investors can withdraw their money at any time.
Although the two firms will seek to work together, they will maintain separate lists of clients and charge different fees.
Investors have been paid £2.54bn from the sale of the trapped assets. Link is still holding £141mn worth of assets, largely comprising stakes in private businesses that it has been unable to sell at a satisfactory price, as of the most recent update to shareholders in March. Link warned it may not be able to sell these assets until at least 2023.
If the remaining trapped assets were sold at their current value, investors would be dealt a £1bn loss compared with the value of the portfolio on the day it was frozen.
The amount of compensation due to investors will be the subject of complex legal wrangling. Lawyers will ask the court to consider how much money Woodford clients would have made if the fund had been properly managed and continued to operate.
Leigh Day, which has issued claims on behalf of 1,000 clients, estimated it would seek £100mn. Harcus Parker has 1,500 clients and both firms will have more time to add claimants, meaning the total value of the lawsuit will probably grow.
The firms will ask the court to impose a deadline by which investors need to sign up to be represented in the lawsuit.
Lawyers expect to appear in court in October to make their case for joining forces. The full lawsuit is anticipated to take years, unless the parties agree to a settlement. Neither firm plans to bring a case against Woodford himself.
“Hundreds of thousands of ordinary people have lost significant amounts of their life savings investing in this fund. We contend this is a direct result of Link’s mismanagement,” said Meriel Hodgson-Teall, a solicitor at Leigh Day. “Collaborating with Harcus Parker is the most effective and efficient way of securing justice.”
Daniel Kerrigan, senior associate at Harcus Parker, said: “We know that investors have been waiting for far too long for compensation and we are confident that working together we will deliver a positive resolution for our clients as soon as possible.”
Woodford investors are also waiting for the FCA’s report on the demise of his fund, which had been expected at the end of last year. FCA chief executive Nikhil Rathi said in a letter to the Treasury select committee in December that “all key evidence has been gathered” but the watchdog needed more time to decide what action to take.
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