The Financial Conduct Authority (FCA) said it could fine Link Fund Solutions (LFS) £306m ($358m) for failing to properly manage liquidity in the now defunct flagship fund overseen by Neil Woodford.
The City watchdog said it was ordering the fund’s administrator, Link, to ringfence the sum as part of conditions related to Link’s takeover by the Canadian cloud-based software company Dye & Durham (DND.TO).
Link was the so-called authorised corporate director of the Woodford Equity Income Fund, which meant it had a duty to monitor the fund and hold the fund manager to account.
Link froze the fund in June 2019, trapping £3.7bn of over 300,000 retail investors’ funds.
“The FCA’s current view is that the redress payment LFS could be required to pay may be up to £306m. This redress proposal reflects the FCA’s current view of LFS’ failings in managing the liquidity of the WEIF,” the FCA said in a statement.
“It does not reflect any amount which may be owed to anyone else, including members of the fund, as a result of potential wrongdoing by other parties.”
The City regulator stressed the figure was provisional and that Link could challenge any financial penalty the FCA levied.
The regulator’s position follows Dye & Durham’s takeover bid for Link, as the deal requires the FCA’s approval.
The FCA said it would approve the deal on the condition that the companies committed to cover an eventual penalty or payment to consumers.
Link has returned £2.54bn to investors from the sale of assets in the frozen fund. It has said the remaining assets may not be sold until 2023 or beyond.
Woodford’s fund was suspended after the stock picker, who had built large positions in hard-to-trade shares, was unable to sell assets quickly enough to meet mounting withdrawal requests from investors. At its peak, the fund was worth more than £10bn.