This article reflects the opinions of its author and not necessarily those of ShareSoc.
Different approaches from SEC and FCA
The Burford and Woodford cases highlight different US and UK practices.
In the US, the Judge explains the role of the litigation funder, justifies its role and why it should not affect his judgement.
In the UK, the FCA, in the case of Woodford and Link, is attempting to work with Link to allow the plaintiff to settle all its compensation claims for what has been estimated by some to be about one quarter of the true loss (actual losses plus lost opportunity to realise any investment returns or earn interest). This is of significant concern to the ShareSoc Woodford Campaign as an inappropriate use of FCA powers as it would undermine the use of legal compensation claims in the future. Of the various Legal claims only RGL is currently suing Hargreaves Lansdown, as opposed to Link.
Not only does it appear that no-one in particular is being held to account, as no individuals have been banned from the industry and only Link have been fined (£50 million); but this fine will be waived by the FCA if their proposed scheme of arrangement proceeds and is approved by 75% of creditors in value and 50% in number.
Another woeful action of the FCA is their deliberate obfuscation and misleading statement on the size of investors’ loss, which they calculate at £298m (but have not published the arithmetic behind this number), and they say the proposed £230 million settlement scheme will give investors 77% of their loss. However, the fund was “worth” £3.5bn when it was suspended and investors have only got about £2.5bn back so far, so the loss is pretty obviously about £1bn, plus interest since June 2019. So, the proposed settlement is less than 25% of the loss.
The FCA did not cover itself in glory in the case of the infamous Burford insider trading/ shorting case either, when it opposed and won the case not to share trading data, see
The UK needs to avoid cosy crony capitalism. If we wish to attract risk capital to the UK, we need a better form of capitalism than this. People and firms that fail in their legal duties must be held to account, promptly and fully. Redress and retribution must follow. The UK should look to the US and the lessons to be learnt.
Cliff Weight, ShareSoc Member
DISCLOSURE: The author holds shares in Burford (lots!) and a few in Hargreaves Lansdown.