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Woodford Group Litigation Secures ATE insurance and Funding

Updated: Jun 26, 2021

After a year-long investigation into potential claims on behalf of investors in the Woodford Equity Income Fund which included analysing WEIF’s investments, liquidity and determining the causes of action, Leigh Day has now secured after the event insurance (ATE insurance) in relation to its group claim against Link Fund Solutions Limited (Link) on behalf of investors in the Woodford Equity Income Fund (WEIF).

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Why ATE insurance matters

As with every court case, there is a chance that the claimants might lose and with this comes the risk that the court might order claimants to pay the costs of the defendants.

The ATE insurance serves to protect Leigh Day clients from the risks of having to pay those costs and enables a claim of this size to progress to court.

Leigh Day is now in a position to formally launch the claim on behalf of Woodford’s investors.

The claim is against Link, the Authorised Corporate Director of the WEIF. This means that it is responsible for managing the fund, which includes ensuring that the fund invests in suitable assets and that it acts in the best interests of its investors, pursuant to the Financial Conduct Authority (FCA) rules and the fund’s prospectus.

Link delegated some of this function to Woodford Asset Management LLP, but under the FCA’s rules, Link remained responsible for ensuring this function was performed properly. Link’s role was crucial in protecting investors’ interests.

The law firm believes that Link was “asleep at the wheel”. It will be alleged that they failed to ensure that the WEIF maintained an appropriate level of risk to match the level of risk which investors had agreed to take on. It will also be alleged that they failed to ensure that the fund had sufficient liquidity to enable it to meet the likely number of redemption requests. Link’s alleged failings are a significant factor in why the fund performed as poorly as it did, why it was suspended and why it is now being wound up.

In addition, since the fund’s suspension, Link has accepted that the value of some WEIF assets has been adjusted in order to deliver their realisation in an orderly and efficient manner. This has meant that investors’ losses will be even greater than they might otherwise have been, had liquidity been better managed.

Leigh Day consider that Link’s conduct amounts to multiple breaches of the FCA rules, in particular that the WEIF had a risk-spread that was not appropriate for the fund and it held excessive levels of illiquid and difficult-to-sell investments.

With credit to Leigh Day

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