Britain’s largest fund shop Hargreaves Lansdown is facing a second legal claim for its part in promoting Neil Woodford’s defunct fund that lost investors millions of pounds.
Law firm Slater and Gordon claims there is a case for Hargreaves to answer after it plugged the Woodford Equity Income fund on its Wealth 50 “best buy” list.
Hargreaves recommended investors buy the fund right up until it gated in June 2019, trapping £3.7bn belonging to more than 300,000 investors.
This was despite a slump in the fund’s performance dating back to 2017, rule breaches by Mr Woodford regarding investments in unlisted stocks and investors and other brokers ditching the manager in large numbers.
Some 2,000 investors will be involved in the legal battle looking for Hargreaves to make good the significant losses suffered since the fund closed.
Gareth Pope, of Slater and Gordon, said: “We have very carefully considered the facts which have led to investors losing millions of pounds as Mr Woodford’s funds featured on Hargreaves Lansdown’s best buy list. Having done so, we now believe there’s a case for Hargreaves to answer.”
Initial investigations raise concerns over various representations made by Hargreaves Lansdown regarding the Woodford funds, according to the law firm.
Alleged failings included listing Mr Woodford’s fund on its Wealth 50 best buy list when Hargreaves Lansdown knew, or should have known, that there were serious concerns with the fund and their holdings.
Mr Pope added: “Hargreaves knew its customers would rely on the fund’s inclusions on the Wealth 50 list, potentially to their detriment, but did nothing to address this issue. This exposed its customers to losses of thousands of pounds.”
The case’s aim is to get Hargreaves Lansdown to make good the amount investors will end up losing when the fund’s winding up is concluded.
Hargreaves Lansdown declined to comment on Slator and Gordon’s allegations.
When the £3.7bn fund closed in 2019, the fund’s administrator, Link Group, took charge of selling off Mr Woodford’s investments in small and unlisted businesses. It later decided to close the fund and sell off all the holdings but has struggled to sell illiquid private companies and has had to settle for below market prices.
Slator and Gordon said it would also challenge that Hargreaves customers would have generated a better return if they were invested in funds that better matched their investment aims and the firm should have made the risks clearer.
Mr Woodford’s fund was billed and marketed as an British income fund and held a large proportion in risky private stocks.
Leigh Day, a law firm involved in a similar case against the broker, said the size of the unlisted holdings in Mr Woodford’s fund raised pressure on Hargreaves Lansdown.
Bozena Michalowska of the firm said: “We have to ask how much Hargreaves Lansdown knew about the trouble at the fund. At what point did it realise something was wrong?”
Some 3,500 Woodford investors have started legal proceedings attempting to claim back some of the incurred losses. Telegraph Money breaks down the legal recourse investors can take here.