The proposed acquisition of Link Group by Dye & Durham (D&D) could be in doubt while the company awaits the outcome of a UK regulatory investigation which could see Link Fund Solutions (LFSL) pay $519 million in redress.
LFSL was the corporate director of the troubled Woodford Equity Income fund (WEIF) and was in confidential discussions with the UK’s Financial Conduct Authority over the fund’s failure.
UK manager Neil Woodford, who was formerly a senior manager at Invesco Perpetual for 25 years, set up his own fund management company in 2014 but the $5.1 billion flagship WEIF fund was suspended in 2019 after poor performance, rising outflows and holding illiquid assets.
The outcome of this could have a knock-on effect on the Dye & Durham deal as the FCA has said it would only approve its acquisition of Link if D&D undertook to cover any shortfall in the value of assets of LFSL, up to $519 million in relation to redress payments.
A statement from the FCA said: “This redress proposal reflects the FCA’s current view of LFS’s failings in managing the 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 potential wrongdoing by other parties.
“The FCA has therefore 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 available to cover any redress payments LFS may be required to make.
“This is the only condition the FCA has decided to impose to allow D&D to take control of the seven UK-authorised firms. The FCA has approved a change in control for the other six UK-regulated entities owned by Link Group.”
In response, Link announced to the Australian Securities Exchange (ASX) that it would challenge the proposed action.
The ASX statement said: “LFSL will explore all options including challenging any Warning Notice that may be issued at the regulatory decisions committee and further through the Upper Tribunal, as LFSL does not agree with the FCA’s view.
“Link Group remains supportive of LFSL considering all options and notes that LFSL continues to trade profitably with a leading position in its market. Link Group has not made any commitment to fund or financially support LFSL.”
