U.K. – FCA Fines of Takeover of Link Group

U.K. – FCA Fines of Takeover of Link Group

On 12 September 2022, UK FCA said it will likely make LFS pay £306mn penalty.

  • FCA issued update on its involvement in proposed takeover of Link Group by D&D.
  • UK FCA announced it has decided to impose conditions on takeover of Link Group.
  • UK FCA's decision to impose conditions follows announcements made on 12 September 2022 by Link Group to ASX and Dye and Durham (D&D) to the Toronto Stock Exchange.
  • Follows UK FCA February 2021, statement on Woodford Investment Ltd.
  • And follows UKP January 2022 letter to UK FCA on Woodford follow-up.

D&D’s Acquisition of LFS Approved

  • Planned takeover of Link Group by D&D involves acquisition of 7 FCA-authorized firms.
  • D&D must seek FCA approval to take control of these firms, one of which is Link Fund Solutions Ltd (LFS), which managed the LF Woodford Equity Income Fund (WEIF).
  • FCA investigated the circumstances leading to the suspension of the WEIF and is likely to seek to require LFS to pay a financial penalty and/or consumer redress.
  • However, this is not a final decision; LFS can challenge any proposed action at the regulatory decisions committee, the FCA’s independent decision maker in contested disciplinary cases, and, then through the Upper Tribunal if LFS chooses to do so.
  • FCA’s current view is that the redress payment LFS could be required to pay may be up to £306mn, reflecting FCA's view of LFS's failings in managing liquidity of the WEIF.
  • It does not reflect any amount which may be owed to anyone else, including members of the fund, as a result of any potential wrongdoing by other parties.
  • FCA-determined redress is based on misconduct, not loss from market fluctuations.
  • FCA decided to approve D&D’s acquisition of LFS, subject to a condition to commit to make funds available to meet any shortfall within LFS in the amount to cover redress payments LFS may be required to make - this is the only condition FCA will impose.
  • Including this condition, D&D is allowed to take control of the 7 UK-authorised firms. FCA approved a change in control for the other 6 UK-regulated entities owned by Link.

Next Steps

  • UK FCA is continuing to investigate matters relevant to the operation of the fund.
  • FCA is investigating many parties re the circumstances that led to WEIF suspension.
  • FCA will consider further failings which may have negatively impacted investors.
  • Dye & Durham is not a party to UK FCA’s enforcement investigation of LFS.
  • FCA will provide an update to investors as soon as it is able to do so, as the regulator understands investors will be keen to understand the impact this may have on them.