The authorised corporate director of Neil Woodford's collapsed equity income fund has been ordered to pay up to £306mln compensation to investors.
Link Fund Solutions was responsible for "misconduct" and "failings" in managing the fund's liquidity, the Financial Conduct Authority said in an initial assessment overnight.
Link may also face a fine as well, the regulator said.
The FCA, which confirmed it is investigating “multiple parties” in connection with the controversial closing of what was the £3bn Woodford Equity Income Fund (WEIF), made the statement in response to Link’s Australian parent, Link Group, potentially being taken over by Canadian software group, Dye & Durham.
It was, however, the first preliminary finding of wrongdoing by the FCA after the fund collapsed in 2019.
The regulator, which in January promised a statement on the Woodford affair, stressed that it was not a “final decision” and Link could challenge its findings.
The FCA said it was "likely to seek to require LFS to pay a financial penalty and/or consumer redress" and that its current view is that the redress payment could be required to pay "may be up to £306mln" but this "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".
As authorised corporate director of WEIF, Link was responsible for approving the valuations put on the fund’s investments as well as overseeing its governance, while it eventually shuttered in the June 2019 due to an “increased level of redemptions”.
So far, just over £2.5bn has been returned to investors, with Link saying in June that roughly £118.5mln was still in the fund.
Link has also been taken to court by investors over fund's collapse, with law firms Leigh Day and Harcus Parker joining forces over their claims on behalf of the estimated 270,000 that were locked into the fund when it Link blocked withdrawals.
The lawyers claim that Link was in breach of FCA rules in the way it managed the fund and that this ultimately led to its collapse.
On Tuesday Link said in a statement that it would “explore all options” if the FCA hits it with a penalty, including challenging the regulatory decision.
“Link does not agree with the FCA’s view," it said.