Campaigners at the Transparency Task Force (TTF) may appeal against the UK High Court’s approval of the Scheme of Arrangement relating to the Woodford Equity Income Fund.
Link Fund Solutions proposed the Scheme and the TTF said this was “enthusiastically” championed by the Financial Conduct Authority (FCA).
TTF said an important legal principle was at stake, which is whether an individual’s statutory rights to protection under the Financial Services and Markets Act 2000 (FSMA) can be taken away without their individual consent, long after they have purchased products that are described as benefiting from those rights.
TTF said the Woodford prospectus informed investors that they benefited from statutory rights to refer complaints to the Financial Ombudsman Service to obtain fair compensation should things go wrong, and to have the liability settled – up to £85,000 – by the Financial Services Compensation Scheme (FSCS) should the firm then default in payment.
In a statement, the TTF said leading counsel for the FCA argued in court that these protections could legally be extinguished by the proposed Scheme of Arrangement, and asked the court to sanction the Scheme which the FCA had negotiated with Link’s Australian parent over several months.
The deal struck offers investors up to 77p in the pound and was described as the best way for most people to get their money back. However, TTF disagreed and said many people – contrary to what they believed – would not get that much.
The TTF said that the judgement sets a precedent, namely that a Scheme of Arrangement sanctioned by the court can denude investors of their FSMA protections, many years after making their investment decisions in good faith.
“The Scheme offers an appalling outcome for those who were trapped in Woodford’s flagship fund when it was suspended in June 2019,” claimed Andy Agathangelou, founder of the TTF. “Most will get back between four and eight pence in the pound of their outstanding capital losses, with nothing for the returns forfeit over the past four and a half years, let alone consequential losses – so much, much less than many have been led to believe by the FCA.”
He argued that “Parliament-given rights” of consumers “seem to have been cast aside, as if Parliament had never intended them”. This means the same risk could apply to other financial consumers, including those buying pensions and investment products, claimed Agathangelou.
