Woodford £230m redress scheme sanctioned by high court

February 11, 2024

The High Court has granted approval to the £230 million scheme of arrangement proposed by Link Fund Solutions (LFS) for investors affected by the collapse of the Woodford Equity Income fund (Weif). Justice Richards, in a judgment released on Friday, expressed confidence in the decision, stating, “Having considered the matter in detail, I see no reason to gainsay (contradict) the conclusion of the overwhelming majority of scheme creditors at the court meeting.”

The decision, initially expected earlier but delayed after a two-day hearing in January, addressed various objections, with a notable concern being the removal of retail investors’ access to the Financial Services Compensation Scheme (FSCS). During the hearing, multiple parties argued that the scheme compelled investors to waive consumer protections provided by the FSCS and Financial Ombudsman Service (FOS), rendering it unsuitable.

Justice Richards, in providing reasons for the decision, clarified that the scheme creditors, through an overwhelming vote, had chosen to settle their claims against LFSL. As a result, there are no longer any claims that can be directed to FOS or covered by the FSCS, eliminating the notion of arbitrarily eliminating access to these safeguards.

Link’s compensation scheme secured approval from 93.7% (by number) and 96% (by value) of the 54,000 scheme creditors at a meeting held in December. The court acknowledged the support of the Financial Conduct Authority (FCA) for the scheme, emphasizing that there is nothing inherently flawed that should undermine the respect for the majority vote.

Despite the approval, concerns lingered among some parties. The Transparency Task Force, an advocate for transparency and fairness in financial services, is actively considering an appeal. Parties interested in challenging the ruling have until February 23 to do so.

Andy Agathangelou, the founder of Transparency Task Force, voiced serious reservations about the outcome, stating, “The scheme offers an appalling outcome for those who were trapped in Woodford’s flagship fund when it was suspended in June 2019.” He emphasized the broader implications, highlighting that the removal of statutory rights affects not only the immediate participants but resonates across all users of UK financial services.

The intricacies of this case have raised questions about the balance between compensating investors and the potential limitations on their rights. The scheme’s approval, while a significant step toward resolution, does not necessarily alleviate the concerns of those who feel the compensation is inadequate or that it restricts their access to additional avenues for redress.

The Transparency Task Force’s contemplation of an appeal underscores the ongoing complexities surrounding this case. As the fallout from Woodford’s fund collapse continues to unfold, it prompts a broader examination of the regulatory landscape, investor protections, and the delicate balance required to ensure fair outcomes in financial matters.