The Financial Conduct Authority (FCA) has issued Link Fund Solutions with a draft Warning Notice with a proposed penalty of £50m over its handling of the LF Woodford Equity Income Fund.
The FCA has been investigating the circumstances leading to the suspension of the fund.
A draft Warning Notice is a normal step in the FCA’s enforcement process, and provides Link with the opportunity to come to an agreement with the regulator to resolve the case.
The notice includes a proposed penalty of £50m but the regulator said Link could receive a discount for prompt settlement.
It also sets out the basis for redress payments Link could be required to pay of up to £306m.
The FCA said the potential redress figure reflects its current view of Link’s failings in managing the LF Woodford Equity Income Fund. FCA-determined redress is based on misconduct rather than any losses caused by fluctuations in market value or price of investments.
It does not reflect any amount with may be owed by any other company or person as a result of potential wrongdoing by other parties.
The regulator added that there are multiple parties currently under investigation in relation to the circumstances that led to the suspension of the LF Woodford Equity Income Fund and that these investigations are ongoing.
Link has 14 days to respond to the notice from the regulator before it goes to the FCA’s Regulatory Decisions Committee and through the Upper Tribunal.
Dye and Durham are currently proposing a takeover of the Link Group, including Link Fund Solutions.
The FCA has placed a condition on its approval for the acquisition, requiring Dye and Durham to make funds available to meet any shortfall within LFS in the amount available to cover any redress payments LFS may be required to make, up to £306m.
