Lawsuit support from shareholder faction for legal action initiated by Woodford investors against Hargreaves Lansdown
In a significant development, a group of over 5,000 investors who lost money in the collapse of Neil Woodford's UK Equity Income Fund (WEIF) in 2019 are taking legal action against Hargreaves Lansdown. The basis for this lawsuit is that the platform allegedly continued to promote and support the fund despite knowing or having concerns about its underperformance and risky investment strategy.
RGL, a claims management firm specialising in financial disputes, is leading the High Court claim on behalf of the affected investors. The initial claim, filed in October 2022, had around 3,200 investors, but the group has since expanded and is expected to reach 10,000 by early 2025.
The lawsuit alleges that Hargreaves Lansdown failed to act in the best interests of its investors by not removing or warning about the fund sooner, leading to substantial financial losses when trading was suspended. The High Court claim is structured on a "no-win-no-fee" basis, meaning investors only pay if the case is successful.
The collapse of the Woodford Equity Income Fund was attributed to a series of poorly performing stock choices, loss of a large investment mandate, and Woodford's over-reliance on illiquid assets. The FCA had previously ruled that Link Fund Solutions, which was the administrator for the fund, made critical errors and mistakes, leading to the fund lacking cash buffers to meet redemption requests.
ShareSoc, an investor rights group, believes that the potential benefits of this litigation outweigh the risks for the majority of claimants. Ryan Hughes, head of investment partnerships at AJ Bell, stated that the compensation offer "will come as significant relief for the thousands of investors who have been very patiently waiting for some form of compensation."
It is important to note that if the claim is successful, 25% will be deducted from the gross proceeds by the claims management company, RGL. Investors who wish to join the High Court claim can register on RGL's website.
Investors have already received £2.56 billion in compensation since the fund's suspension date in 2019, from the sale of investments. However, Andy Agathangelou, founder of the Transparency Task Force, noted that "most [investors] will get back between just four and eight pence in the pound of their outstanding capital losses."
Hargreaves Lansdown has rejected earlier claims, citing a "lack of a substantive basis of claim," but the litigation continues as more investors join seeking redress. The court approval of Link's proposed scheme of arrangement means that claims can no longer be made against Link, but they can still be made against Hargreaves Lansdown.
The lawsuit seeks compensation for investor losses sustained due to Hargreaves Lansdown's continued recommendation of the fund despite its diversification and liquidity issues. The case is a testament to the growing trend of collective action by investors to hold financial institutions accountable for their actions.
Investors who join the High Court claim led by RGL, a claims management firm specialized in financial disputes, stand a chance to seek compensation for their losses that were incurred due to Hargreaves Lansdown's continued recommendation of the Woodford Equity Income Fund, despite its diversification and liquidity issues. If the lawsuit is successful, investors will be compensated, with the compensation offer serving as significant relief for thousands who have been patiently waiting since the fund's collapse in 2019.
