Writing to claimants, Harcus Parker senior partner Damon Parker offered a trio of reasons to vote against the proposed redress scheme, including an insufficient payout and the relinquishing of rights regarding potential Financial Services Compensation Scheme claims.
"The practical effect of the redress scheme is to prevent investors from legally pursuing Link and the other entities that played a part in causing their losses," Parker argued. "Note that the FCA denies this and has recently published an inaccurate summary of the position on its website."
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Speaking to Investment Week, Parker acknowledged that investors will theoretically be able to file claims against third parties involved in the collapse of the former WEIF but argued it will be "impossible" to do so in practice.
He cited the contribution liability detailed in the scheme of arrangement, which essentially indemnifies Link Fund Solutions from any claims that arise from proceedings against third parties.
The clause reads: "LFSL shall not be responsible for any cost, expense, loss or liability (including, without limitation, any liability for adverse costs) incurred by a scheme creditor or any of its representatives in connection with any third party proceedings.
"All costs associated with commencement or continuation of proceedings in respect of the third party proceedings shall be for the account of the scheme creditor only (including, for the avoidance of doubt, in respect of any amount paid to LFSL in accordance with Clause 7.5 below), and shall not be for the account of LFSL."
Parker explained: "If an investor sues Northern Trust [the fund's depositary], and if then Northern Trust claims (as it is bound to) that Link is partly responsible for any losses it may be found to have caused, the investor will have to give back to Link/indemnify Link for anything that Link may be found to have to pay to Northern Trust.
"And, worse, the investor will have to pay Link its costs of defending itself."
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Parker continued: "Of course, both Hargreaves Lansdown and Northern Trust will say they have a contribution claim against Link (they will say that if they are to blame so also was Link).
"They would have to have taken leave of their senses not to put on a contribution claim because they will be aware of the scheme's terms: they will know that it is a perfect way to stop any claim in its tracks.
"No one will in practice sue any third party, knowing that Link's liability back to them is indemnified, with the further threat that Link's costs (they will use Clifford Chance) will also be indemnified.
"And so, by protecting Link, the scheme protects HL and NT and prevents any claim against any third party being brought."
A spokesperson for the FCA told Investment Week the regulator stands by its statement published on 27 November: "This scheme represents the best way for most people to get money back. Any other routes are highly uncertain, would take much longer and be unlikely to deliver anywhere near the levels of redress being suggested elsewhere.
"The scheme does not prevent people making claims against third parties in relation to the failure of the fund and is one member, one vote, so institutional investors have the same voice as individuals' ones."
Compensation and FSCS
Alongside the potential third party issues, Parker argued the proposed payment of £230m is "far too low". He said the FCA had "wrongly calculated" losses of £298m, instead claiming investors had lost more than £1bn since the suspension of the former WEIF.
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"The stated value of the Woodford fund immediately prior to suspension was £3.6bn," the letter reads. "It has since distributed just £2.56bn to investors and has stated it has circa £34m of remaining assets.
"The loss to investors is therefore £1.074bn, not £230m, the maximum that can be paid out to investors under the redress scheme."
Additionally, Parker noted claimants will lose their rights to claim money from the FSCS if they approve the redress.