The Financial Conduct Authority is likely to impose a financial penalty of £306m on Link Fund Solutions (LFS) for failings on its management of the failed LF Woodford Equity Income Fund.

The regulator issued a warning after a proposed takeover of the Link Group by Dye and Durham yesterday.

The FCA said it has investigated the circumstances leading to the suspension of the LF Woodford Equity Income Fund (WEIF), managed by Woodford founder Neil Woodford, and was ‘likely’ to require Link pay a financial penalty and/or consumer redress.

The regulator added that it has yet to make a final decision and that Link will be able to challenge any proposed action.

The FCA said a £306m penalty, “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 regulator has approved Dye and Durham’s acquisition of Link, but only subject to the condition that it commits to making funds available to meet any shortfall within Link to cover any redress payments.

Ryan Hughes, head of investment partnerships at investment platform AJ Bell, said the announcement of a financial penalty was a welcome development for investors impacted by the collapse of the Woodford Equity Income Fund.

He said: “This is the first sign that the investigation into the collapse of the fund is perhaps coming closer to completion, however, the FCA has made it clear that other parties remain under investigation and that Link could appeal any penalty.

“How any payment would be made to impacted investors is as yet unclear and no doubt the FCA will want to complete its wider investigation first. There will likely be further developments particularly given the breadth of the investigation but this news may be a sign that pressure from the Treasury earlier in the year has finally sped things up. Investors who have waited so patiently will be hopeful that some form of financial redress may be forthcoming and they can begin to draw a line under this sorry saga.”

The Woodford Equity Income Fund was initially suspended on 3 June 2019, with the suspension originally due to be lifted in December 2019.

At the time of its suspension the fund was valued at £3.5bn. This dropped to £2.9bn by January 2020 when capital began being repaid. So far £2.5bn has been paid out, with investors still waiting for £140m to be returned.