Leigh Day's Boz Michalowska: Woodford-style scandal will happen again if rules aren't tightened

Q&A with ShareSoc

Lauren Mason
clock • 4 min read
Neil Woodford of Woodford Capital Management
Image:

Neil Woodford of Woodford Capital Management

ShareSoc speaks to Boz Michalowska, the lead partner at Leigh Day, following the recent announcement that they have issued court proceedings against Link Fund Solutions following the Woodford scandal.

Is there any prospect of a claim in relation to Woodford Patient Capital of Woodford Income Focus?

The claim at the moment that we are bringing is a breach of FCA rules that led to WEIF being suspended and wound up.

We have to have a very laser-focused strategy because the aim is here to get compensation for people as swiftly as possible. Woodford Patient Capital and Woodford Income Focus, were not wound up. So they are not currently being considered as part of this litigation. This would have to be a separate claim.

If the action is successful, does Link have deep enough pockets to pay the compensation due to investors?

Link should have indemnity and insurance in place. There is no reason to believe this is not going to be sufficient, bearing in mind the assets they have under management. As of the end of June 2020, they operated 107 UCITS and 93 IAIS and they have respective assets under management of £41bn and £7bn.

They are a subsidiary of Link Administration Holdings. In November, Link purchased the group Capita Assets for £909m, which operates for major business segments, and Link Fund Solutions was a major part of that.

It is an important part of the parent company's business and we would be surprised if Link hung them out to dry. But in that event, and if insurance is insufficient and they are in default of the judgment made, clients are entitled to claim again via the FSCS.

Woodford investors miss out as Oxford Nanopore IPO skyrockets

If Leigh Day class members do not obtain satisfactory address from Link, will Leigh Day class members be precluded from pursuing HL for their uncompensated losses?

If you want to bring a claim against Hargreaves Lansdown, you first have to establish that there was a problem with the fund once you once owned and that it wasn't managed properly.

Once you have established that it wasn't managed properly, as you would do in the case against Link, you then have a further hurdle to overcome, which is that Hargreaves failed in its obligations.

I would have thought that, if you don't achieve a successful claim against Link, you are not going to be successful in a case against Hargreaves Lansdown.

But, if we aren't successful with the claim against Link, it is different cause of action and the claim still within the limitation period, they could arguably do so.

Will all losses be compensated in the event of a successful trial?

If we go all the way to trial, investors will be able to recover 100% of their damages from the defendants. Of course, there is potential settlement and, in those circumstances, there is a negotiation to be had.

If somebody held Woodford in an ISA wrapper and so was doubly hurt by the loss of tax benefits, or wanted to move investment platform but couldn't because of their holding in Woodford, would there be any route to reclaim consequential loss?

We can't advise on the application of tax to any proceeds that they have received from the claim itself. We will be claiming for the return of the balance, plus what investors were entitled to expect as a return on their investment.

Those are the two aspects we are focusing on and, in relation to other individual matters and claims, I would suggest investors contact us and we will liaise on that on an individual basis.

Is there any circumstance where a claimant would be expected to pay any money to Leigh Day if the action was not successful?

If the action is not successful, then we have ‘after the event' insurance in place. But in circumstances where an individual has not been truthful with us, if a client changes their mind having issued proceedings then decides to withdraw that claim, then they would incur an adverse cost as you may not be covered by the insurance policy. The policy expects clients to be committed to that litigation and to see it through to the end.

Could we see a similar scandal happen again?

Yes. Unless there is a tightening up of rules and lessons are learned, this will happen again.

More on Regulation

“We are particularly mystified about why wealthy investors warrant special treatment,” Dzmitry Lipski, head of fund research at interactive investor, said.

LTAF: Industry asks why wealthy investors warrant 'special treatment'

Notice period raises concerns

James Baxter-Derrington
clock 25 October 2021 • 2 min read
The new LTAF regime is likely to form the basis of the redesign of the open-ended property fund sector

LTAF will require minimum 90-day notice period and lays groundwork for property fund overhaul

Groundwork for property funds

James Baxter-Derrington
clock 25 October 2021 • 2 min read
Thomas Coughlin of Kinesis Money

Fool me twice: The lessons we are yet to learn in the 100 years since Weimar hyperinflation

Need to recognise inherent flaws in current system

Thomas Coughlin
clock 22 October 2021 • 3 min read