Woodford Claims and the Financial Ombudsman Service – Update 19 May

This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

We (Boz Michalowska from Leigh Day and me) met with the Financial Ombudsman Service (FOS) on 7th May. They have received 549 claims so far relating to Woodford, Link, Hargreaves and IFAs. They have resolved 3 at final decision stage and these were simple cases against IFAs. We were given no evidence to suggest that the FOS route is likely to have a quick nor successful resolution. ShareSoc cannot give financial advice and individuals must of course make their own decisions.

ShareSoc continue to endorse the Leigh Day claim. Nothing new has emerged from our conversations with FOS, except perhaps the information about simple IFA claims.

The meeting followed ShareSoc’s letter to FOS and their reply.  FOS reply 2021-04-16 to Cliff Weight
FOS referred us to the published decisions against IFAs on their website:

https://www.financial-ombudsman.org.uk/files/303132/DRN-2443143.pdf   this upheld Mr B’s complaint against the IFA and assessed loss on the following basis:
Compare the performance of Mr B’s investment with that of a benchmark; FTSE UK Private Investors Income Total Return Index
If the fair value is greater than the actual value there is a loss and compensation is payable.
If the actual value is greater than the fair value, no compensation is payable.
Actual value = This means the actual amount paid from the investment at the end date.
Mr B may not eventually receive the value placed on his investment in the fund at the end date. In the meantime, he also won’t be able to sell his investment and invest the proceeds elsewhere. To fairly address this, the IFA should:

  • Use the value placed on Mr B’s remaining investment in the Woodford Equity Income fund at the end date when determining the total actual value of his investment.
  • Pay Mr B a return that would likely be generated by the size of this investment in a two-year period.
    The IFA should calculate this by using the average annual return from the benchmark above over the past 20 years.
    The IFA may appropriately deduct any proceeds Mr B received from the liquidation since the end date and prior to the date of their calculation
    Fair value = This is what the investment would have been worth at the end date had it produced a return using the benchmark.

https://www.financial-ombudsman.org.uk/files/300525/DRN-2107432.pdf against IFA  not upheld.

My comments are as follows:

Neither case is relevant to the Link Claim. They may be relevant to a potential claim against HL where HL gave advice.
The Mr B case is really interesting and would appear to set quite a useful precedent, for cases where there has not been the proper contact between the IFA and the client and hence the IFA is at fault. The way the ombudsman calculates the loss is interesting as well. Mr B’s pension was c £100k in 2017, so the claim will be worth the loss in value from 2018 onwards, (say of the order of 30% as I don’t have the exact data to hand) plus the assumed “normal” (sic – as the data period and returns were not normal in the least) returns over c 3 years = c 10% – (I don’t know why they use the last 20 years, not 10 years or 100 years, but  from May 2001 to May 2021 it went from 2152 to 3512 = +70% or about 3%p.a., which is  a very low rate of return.).

Mrs M tried to claim from 2017. She lost her claim. I wonder if she had claimed for losses from 2018, she might have got a different response. This highlights the difficulty of using the FOS, in my humble opinion.

Cliff Weight, ShareSoc Woodford Campaign Director

  1. Jane Cody says:

    Thanks for all your hard work and all the information on this. Great to finally find a source for the detail that is up to date and I can trust.

  2. Mark Seaman says:

    You might want to consider a claim against the Depositary (Northern Trust) as well. They are responsible for overseeing the ACD (Link) and should ensure they are doing their job properly, which they obviously weren’t. They also approve markets as eligible. They approved the Guernsey Stock Exchange when it was doubtful that it was truly eligible under the Regulations.

  3. Amit VEDHARA says:

    Looks like those investors who are, or are considering, using the Financial Ombudsman should be having 2nd thoughts. The two decisions adjudicated (out of hundreds of claims) seem to have had very different approaches taken. Are the FOS technically capable of this sort of case? And can they handle the high volumes when they have a huge overall backlog?

  4. Jane Cody says:

    I’ve just been going through everything to make a decision whether to sign up to the Leigh Day claim or not. It does seem like the best claim but I’m concerned about how things might evolve. My biggest gripe is with Hargreaves – I know I should have put in more time on my portfolio, something I am rectifying now, but I’m sure there are plenty of people like me who went for platforms like HL and “safe bets” like Woodford simply because we were time deprived and we trusted them.

    As well as a direct holding in WEIF I also hold HL Multi Manager Funds which invested heavily in Woodford, and other Woodford related funds like SUPP. I’m just a little concerned that signing up with Leigh Day now, might somehow restrict my future options on claims outside the scope of their current action. Also that those not signing up with the Leigh Day claim may somehow jump on the bandwagon at a later date without bearing any of the costs. Another scenario I imagined was that, in the event of the Leigh Day claim being successful, Hargreaves and other platforms are surely duty bound to make a similar claim against Link on behalf of their customers or could be considered negligent?

    I’ve had a good email exchange with Leigh Day on a couple of these scenarios and of course they can’t crystal ball gaze any more than I can, but it does seem to me that the Leigh Day claim is just the start of a process that may spread and grow. Also, given the massive implications of Link losing the case, and the claims that may then follow, It seems pretty certain that Link will throw everything at it that they can and that could make it very expensive.

    Finally, just to mention that I am two thirds of the way through Owen Walker’s excellent book about the whole sorry affair and am even more shocked than I was when I watched the Webinar, which was also excellent by the way.

    I hope members don’t mind me thinking aloud like this in search of a little input; having taken my investment research a lot more seriously in the past few months I have realised what a lot I have to catch up on, though I’m very pleased to have found ShareSoc as a result!

  5. John Northwood says:

    The FOS will certainly await the outcome of the FCA’s report on the Woodford Debacle which they will then use as a basis for their rulings. They will also probably wait for the result of legal proceedings to provide them with further guidance for their decisions as they do not seem capable ( or competent ? ) to handle such a large scale high profile scandal on their own.
    The FOS reply to Cliff Weight shows their inability to be clear and forthright —— please can someone ask Garry Hunter what the heck is a “timely manner” —— one week or 20 years??

  6. Cliff Weight says:

    The Link scheme of arrangement has wiped out the FOS claims made by individual against Link using the FOS. However I think there were less than 100 of these.
    FOS claims by individual investors against Hargreaves remain ongoing. I think there are about 400 of these. Does anyone reading this have such a claim. If so please could they get in touch with me?

    I am investigating whether Hargreaves customers who invested in WEIF, can and should now launch a complaint against Hargreaves. Hargreaves would then have 8 weeks to settle the claim or respond otherwise. At which time the individual could launch a claim via the FOS. Views?

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