Hargreaves Lansdown hit by lawsuit over Neil Woodford’s fund collapse

Hargreaves Lansdown has been hit by a lawsuit on behalf of thousands of investors in Neil Woodford’s fund, the first time the FTSE 100 fund supermarket has been sued for promoting the one-time star stockpicker.

RGL Management, a claims management company, is seeking hundreds of millions of pounds in compensation for investors in a lawsuit brought by Hargreaves Lansdown and fund manager Link Fund Solutions in the High Court.

The lawsuit is the first to target Hargreaves Lansdown, who recommended Woodford’s fund on its influential “Best Buy” list of investments until the £3.7billion vehicle was suspended in 2019.

Both Hargreaves Lansdown and Link have repeatedly denied the allegations against them. The companies declined to comment on RGL’s lawsuit.

Two other law firms, Leigh Day and Harcus Parker, considered the case against Hargreaves Lansdown, but decided to pursue Link only as an easier way to recover money.

“RGL Group is determined that both Hargreaves Lansdown and Link should be held accountable,” said Alexander Weinberg, a partner at Wallace law firm, which RGL has hired to handle the case.

Around 300,000 investors had their money trapped in Woodford’s flagship fund when it was frozen in June 2019.

More than 130,000 Hargreaves Lansdown clients were invested in the Woodford fund as of June 2019, according to a letter from Chief Executive Chris Hill to the Treasury Select Committee at the time.

According to the letter, Hargreaves Lansdown urged Woodford to address the fund’s growing portion of investing in small and private companies in 2017. However, the platform stuck to its recommendation until the day the fund collapsed.

RGL’s lawyers will argue that without Hargreaves Lansdown’s recommendation, investors might not have bought the fund or might have sold off when Woodford began struggling. It alleges the company violated its legal obligations to clients by not doing enough to communicate its concerns about the fund.

Lawsuits against the FTSE 100 group open up a potential new way for Woodford investors to recover money.

The allegations against Link argue that it failed to meet its legal obligation to oversee the fund, escalating liquidity issues with Woodford’s high allocation to private companies to the point where it was difficult to repay investors who wanted to exit.

Link Fund Solutions is already facing claims of more than £300m in penalties and damages from the Financial Conduct Authority and its Australian parent company has said it will not foot the bill if successful claims result from Woodford , are higher than the UK company can pay. Link disagrees with FCA’s assessment.

Lawyers expect the court to give plaintiff classes a deadline in the first half of next year to start attracting investors.

https://www.ft.com/content/ee9b0fe1-602f-41c8-a4a8-d970bd18cc1f Hargreaves Lansdown hit by lawsuit over Neil Woodford’s fund collapse

Adam Bradshaw

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