Monday 22 March 2021 8:15 am

Investors sue Hargreaves Lansdown over losses linked to Neil Woodford collapse

Investors who lost money when Neil Woodford’s flagship fund collapsed are suing financial adviser Hargreaves Lansdown and corporate director Link in a bid to recoup their savings.

The legal action, led by RGL Management, will centre around losses sustained directly as a result of the failure of the Woodford Equity Income Fund in 2019.

Read more: Peter Hargreaves to sell £300m worth of shares in Hargreaves Lansdown

It will also focus on “loss of opportunity” costs, suffered through missing out on alternative investments that, in contrast to the Woodford fund, would have generated positive returns.

RGL said that investment platform Hargreaves Lansdown continued to recommend the fund to its clients up to the day of the collapse, “despite being aware of longstanding portfolio diversification and liquidity issues”.

Investors have claimed that Link, the authorised corporate director of the fund, failed to “appropriately administer and manage” the Woodford Equity Income Fund.

It was reported yesterday that the Financial Conduct Authority (FCA) has refused to hand over its investigation into the failure of Neil Woodford’s investment firm to an independent judge, amid calls for the City watchdog to be probed for its own role in the scandal.

Activists have urged the regulator to pass the inquiry to an independent judge who can investigate the FCA’s handling of the collapse of Woodford’s empire. 

Read more: Jersey regulator criticises Neil Woodford’s comeback

However, it has refused to relinquish control of the investigation, saying it “cannot delegate these powers and responsibilities to third parties”, the Telegraph reported.

“Only the FCA has powers under the Financial Services and Markets Act 2000 to investigate regulatory contraventions and take enforcement action,” it said in a letter to activists, signed by FCA chairman Charles Randell.

Campaigners Gina and Alan Miller had reportedly written to the watchdog’s non-executive directors saying there is an “urgent and unanswerable case that the Woodford investigation should not only be conducted by an independent third party…but must also include the conduct of the FCA pertaining to the scandal”.

Woodford Equity Income fund, the former star stockpicker’s flagship find,  was suspended in 2019 after becoming overwhelmed by investor withdrawal requests, leading to the investment industry’s biggest crisis in years. 

Read more: FCA failed to act for two years on Woodford concerns

Wealth manager St James’s Place ended its contract with Woodford to manage three of its funds.

His empire imploded when Kent County Council withdrew a £263m investment mandate from the firm. He then prevented investors from selling holdings in his £3.7bn fund before he was sacked.

Earlier this month it was reported that the FCA had been made aware of problems at Woodford’s firm two years before its failure.

Concerns over the strategy were raised in 2015, just a year after its launch, when chief operating officer Nick Hamilton and chief legal and compliance officer Gray Smith resigned. 

Smith and Hamilton were then asked to take part in exit interviews with the City regulator, according to the Financial Times.

Hamilton and Smith were reportedly concerned with the amount of money being committed to unlisted companies, but the FCA did not act on the information they presented. 

Last month, Woodford revealed he is preparing to launch a new Jersey-based investment vehicle, Woodford Capital Management Partners. 

He pledged not to repeat the mistake of investing ordinary investors’ money in illiquid stocks, which contributed to the collapse of his former business.

Read more: MPs urge FCA to set date for Woodford investigation end

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