Law firm investigating claims against Woodford fund’s corporate director Link Fund Solutions

The potential legal action related to Woodford Equity Income listing holdings on Guernsey’s International Stock Exchange.

Funds and Investment Trusts June 5, 2020 by Tom Bailey

A year after the suspension of the LF Woodford Equity Income fund, law firm Nelsons has confirmed it is looking into launching legal action against the fund’s corporate director, Link Fund Solutions.

According to Nelsons, by allowing the fund to list several of its previously unlisted holdings on Guernsey’s International Stock Exchange, Link Fund Solutions may not have been fulfilling its fiduciary duty.

Prior to its suspension, Woodford Equity Income made the decision to list several of its unlisted holdings on The International Stock Exchange in Guernsey. This allowed the fund to skirt rules limiting unlisted holdings to just 10% of a fund’s portfolio.

However, with trading on the Guernsey exchange so thin, it has been argued that in practice this did not make the portfolio anymore liquid in practice.

According to Cathryn Selby, partner and head of Nelsons’ dispute resolution team: “Events leading up to the suspension of the Woodford Equity Income Fund revealed that a number of unquoted companies in the portfolio had been listed on The International Stock Exchange in Guernsey – allowing Neil Woodford to maintain a heavy weighting to unquoted companies far in excess of the 10% dictated by fund rules.”

Sleby says that Link Fund Solutions was involved in the decision to list the companies in question on Guernsey’s International Stock Exchange.

She continues: “We are looking at whether such decisions were indeed in the best interests of all investors, or whether it could be said that investors were let down by Link Fund Solutions’ apparent failure to address the substantive issue of the increasing illiquidity of the fund at a much earlier stage.”

Link Fund Solutions has previously dismissed any suggestion that it has anyway acted improperly, arguing it has “at all times acted in accordance with applicable rules and in the best interests of all investors”.

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