RGL Management has formally launched legal action against Hargreaves Lansdown, which continued to recommend Woodford Equity Income to its clients right up until its suspension in June 2019, even though its analysts raised concerns in 2017.
RGL Management has taken legal action against both Hargreaves Lansdown Asset Management and Link Fund Solutions, the fund's authorised corporate director, as it was first reported by This Is Money and The Times.
The claims will centre around losses sustained directly as a result of the collapse of WEIF and also for "loss of opportunity" losses, suffered through missing out on alternative investments that, in contrast to WEIF, would have generated positive returns.
Those investors who suffered due to the terrible mismanagement of the WEIF deserve to be compensated."
RGL's letter before action, sent by Wallace, a London law firm, claims that Hargreaves Lansdown failed to "provide accurate, adequate and up-to-date information" about the Woodford fund in the days leading up to it being frozen.
Hargreaves kept the fund on its "best-buy list" right up until its suspension in June 2019, even though its analysts raised concerns about the illiquidity of stocks in November 2017.
When the fund closed, 134,000 clients of the wealth manager had direct holdings in Equity Income worth just over £1bn. A further 160,000 had indirect exposure through funds with holdings in Equity Income bringing total exposure up to £1.6bn.
James Hayward, CEO of RGL Management, said: "Those investors who suffered due to the terrible mismanagement of the WEIF deserve to be compensated. In bringing an action against both Link and Hargreaves Lansdown, RGL offers the best chance of a full recovery of losses for WEIF investor claimants, as well as the most competitive offer for investor recovery of any claim on the market.
"Put simply, investors have a choice, our legal team is first-class and we are offering the best financial terms."
RGL said investors who join the claim stand to receive the most competitive rates of return compared with any equivalent rival claims. Upon success, RGL will deduct 25% including VAT from its claimants, compared to Harcus Parker which plans to deduct 42% including VAT and Leigh Day which will deduct 30% including VAT.
Alexander Weinberg, a partner at Wallace LLP, said: "We believe bringing an action against both Hargreaves Lansdown and Link offers claimants the best possible chance of a successful outcome. Both defendants have pressing cases to answer and we are very confident in the strength of the legal claims against them."
It is believed that more than 300,000 investors have been left stranded in WEIF.
Hargreaves Lansdown shares are down 0.70% to £1,555 this morning.
Meanwhile, the Financial Conduct Authority has ignored calls to hand over its inquiry into the Woodford collapse to an independent investigatory body. Politicians and consumer advocates have warned the FCA's own failures to regulate Woodford would be unlikely to receive proper scrutiny in a review of itself.
Hargreaves Lansdown did not respond to requests for comment.
(First published by our sister title Investment Week)