An update following the court hearing on 18th and 19th January
Justice Richards reserved his judgement on whether to Sanction the Link Scheme at the end of the Hearing on 18/19 January. It is now expected early in February. Initially, he plans to circulate a draft to those who were represented at the Scheme Hearing.
Schemes of Arrangement (a mechanism generally used for insolvencies and mergers) are normally relatively straightforward with judgement announced on the day. The delay suggests that, at the very least, some serious and complex arguments were raised during the Hearing, which the judge needs to carefully consider.
Given the sums of money involved, the numbers of investors affected, and the importance of the legal issues and potential precedents involved, the Judge is aware that appeals may follow.
The court first heard from Link’s barristers and then from opposing counsel representing Harcus Parker and the Transparency Task Force (TTF). Cliff Weight then spoke on behalf of individual investors and ShareSoc’s Woodford Campaign members. This was followed by representations from 5 individual objectors, and finally by the FCA’s counsel and the barrister for the Investor Advocate.
The Judge appeared to recognise ShareSoc’s point that the £183m – £230m compensation is clearly inadequate relative to the £298m harm that the FCA has identified in relation to the failure to suspend WEIF in the period Nov 2018 to June 2019.
Justice Richards also appeared to take on board the argument that the FCA’s £298m only represents a “subset” of the total losses that investors have suffered, due to disregard for the fund mandate, failure to adhere to the formal liquidity constraints that apply to a UCITS fund, the manner of the liquidation of fund assets and the opportunity cost to WEIF investors since suspension.
The FCA barrister accepted the subset point and clarified that the FCA had at the last minute entered into evidence that the ‘FCA Total Amount’ relates only to the benefit gained by investors who exited the fund after it breached liquidity rules in November 2018 – the “first mover advantage” up to the point the fund was suspended. Nevertheless, this clarification from the FCA fundamentally affects the understanding derived from the term “FCA Total Amount”.
Counsel for the TTF argued that the law cannot allow a Scheme to remove individual investors’ statutory FSCS protections (up to £85,000 per individual) or to remove individuals’ right to refer their cases and claims to the Financial Ombudsman Service (FOS). Link’s barristers, in their reply, attempted to counter these arguments. This is a complex and contentious legal matter on which Justice Richards will no doubt clarify his view in his judgement.
Many objectors complained that the Scheme document and associated process were unfair, presenting a one-sided view and failing to clearly lay out the relevant alternatives. They argued that the biased documentation and process were misleading to investors.
We now await judgement and any subsequent news from the FCA. It would be highly unusual for a Scheme of Arrangement vote to be over-ridden by the court, particularly where the vote in favour was 93% (90% of individual investors).
Please note that if you are not already a Full member, there is a special discount available for anyone signing up to support ShareSoc as a Full member: Woodford Campaign Member Special Offer – ShareSoc
Disclaimer: ShareSoc cannot and does not provide advice. Advice requires knowledge of an individual’s precise circumstances. The above should be viewed only as general guidance.
The last sentence should end in particularly where the vote in favour was 93% (90% of individual investors of those who voted!)
I, as a share holder, voted not to accept the derisory offer, thank goodness the Judge has some concerns too., maybe, just maybe he will order that the whole situation is looked at again. Once the wall is breached, others will follow, lets hope the Judge will consider that. Surely my right to appeal to the Financial Ombudsman cannot be taken away?
The information given did not clearly highlight that it would mean FSCS protections. Such protections should not removed from an investor by taking a vote. Statutory protection seems to have lost its meaning.
If this had been a company scheme of arrangement all shareholders would expect to receive voting papers automatically.
In this case it was made more difficult for investors as they had to make contact in order to vote.
Did Hargreaves Lansdown vote on behalf of those of its clients that didn’t vote?
Whilst they put several ‘secure messages’ in my HL account inbox, they didn’t send me an email to tell me it had done so (which it normally does). It’s as though they didn’t want to alert its clients to the vote for some reason.