Odey Asset Management LLP · DRN-6120577

The complaint Mr S complains that Odey Asset Management LLP (OAM) failed to attempt reclaims of withholding tax on assets held within a fund it managed – and into which Mr S was invested. He says this failure has led to the fund, and his holding in it, being worth less than it ought to be. What happened Mr S had a holding in a fund I’ll call “fund N”. Fund N was a sub-fund of an umbrella master fund (“the Master fund”) domiciled in Ireland. Fund N was an alternative investment fund (AIF) and OAM was appointed as its manager (AIFM). Fund N was terminated in early 2023, with assets sold and distributions made of the proceeds to investors, including Mr S. But the fund retained some illiquid assets – holdings in Russian securities subject to sanctions – which couldn’t be sold. So the fund remained in existence until such time as those assets could be sold. Later in 2023 OAM was replaced as AIFM of fund N by another firm I’ll call L. In 2024, Mr S complained to OAM. He initially complained about the dates used by fund N to apportion reclaimed withholding tax. Where assets within the fund were subject to withholding tax on dividends, the fund could reclaim that under double-taxation treaties. Mr S complained that the fund apportioned the value of the rebate on the day the rebate was received, rather than on the date the original dividend was paid. He said that conflicted with industry standards. Mr S then expanded his complaint to include the fact he didn’t think the fund, or OAM, had reclaimed withholding tax on all the occasions it was able to. He said this caused the fund’s value to be less than it could have been, resulting in a loss to him as an investor. OAM didn’t respond and Mr S brought his complaint to our service. There has been considerable correspondence between Mr S and our investigator, as well as with OAM. Our investigator concluded that the complaint shouldn’t be upheld. In summary he said: • Under the Master fund’s prospectus, it was the board of directors of the fund who had responsibility for deciding whether to apply for withholding tax rebates, not OAM. • The prospectus also detailed how the net asset value (NAV) would be recalculated when withholding tax claims were received. • Even if OAM were responsible for making such claims, it would have discretion about whether or not to do so in line with its general discretion to manage the fund. • Here OAM had explained that pursuing some claims wasn’t deemed worthwhile. Mr S disagreed and asked for an ombudsman’s decision. In summary he said:

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• There was considerable overlap between OAM and the directors of the Master fund. And even if the board of the fund was distinct from OAM, the manager had obligations to act with due skill, care and diligence and in the best interests of investors. This would have included “advising, facilitating, or ensuring the directors exercised discretion properly during their tenure and handover.” • To the degree OAM had discretion as to whether to apply for withholding tax refunds, it hadn’t been evidenced that it exercised that discretion fairly. • OAM hasn’t shown it gained enough information to exercise its discretion on an informed basis. • The tax reclaims can’t have been overly burdensome or costly to make them not worthwhile. Mr S gave the example of a company (which I’ll call W) whose primary business is to handle withholding tax reclaims and does so in totality and only charging a fee if successful. • In support of this Mr S asserted that the Master fund utilised W to reclaim tax in other funds within the Master fund umbrella, just not fund N. This differential treatment of the fund he’s invested in isn’t fair. • The funds’ accounting for tax reclaims (restating value on receipt of reclaim not date of dividend) contradicts industry norms and harms investors. • OAM owed a fiduciary duty to him and other investors, and this duty can’t be circumvented by boilerplate contractual terms giving discretion to the board. OAM responded to the investigator to say: • It reiterated that Mr S wasn’t a customer of OAM and it had no relationship with him. • Decisions about withholding tax weren’t OAM’s to make, they were done by the funds’ boards. • Firms like W charged excessively high fees which was why they hadn’t been engaged in the past. While the Master fund did enter into an agreement with W to process reclaims in 2023, this post-dated the closure of fund N. As OAM was removed as AIFM of the funds soon after it didn’t know what had happened with the other reclaims. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. I’d first like to note that I have summarised the parties’ submissions in far less detail than they were submitted. And I don’t intend to address each and every point that has been raised. I hope Mr S doesn’t take this as a discourtesy, but the purpose of my decision is to give my conclusions and the reasons for reaching them, not to comment on every argument. This complaint is about whether or not withholding tax applied on assets held by fund N should have been reclaimed where possible. It’s therefore important to establish who was entitled to take that decision. I’ve therefore considered the Master fund’s prospectus, which sets out the makeup and structure of the fund (and its sub-funds including fund N) and the roles and responsibilities of the various parties involved. The prospectus explains what the

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AIFM (given as OAM) is responsible for, and on the matter of withholding tax it says: "The Master Fund may not be able to benefit from reduced rates of withholding tax by virtue of the double taxation treaties in operation between Ireland and other countries. The Directors will have sole discretion as to whether the Master Fund will apply for such benefits and may decide not to apply for such benefits if they determine that it may be administratively burdensome, cost prohibitive or otherwise impractical." I think this is clear. Whatever other funds might do, the contractual structure of this particular fund (or set of funds) was such that the directors were responsible for withholding tax reclaims. So on its face it appears to me that Mr S is complaining about something OAM wasn’t responsible for. I therefore don’t think it would be fair or reasonable to direct OAM to do anything in regard to any decisions made by the fund on withholding tax. Mr S has offered two main arguments in respect of this point. Firstly that the makeup of the fund’s board was decided by and made up of persons connected in a material way with OAM, such that it wasn’t in reality distinct. However I’m satisfied that the Master fund was itself a distinct legal entity from OAM, with its own rights and obligations. Mr S is of course free to pursue that entity, the fund itself, for the losses he claims flow from its decisions regarding withholding tax. But I don’t think the fund directors’ overlap with OAM mean it would be fair or reasonable to hold OAM responsible for things another party had the contractual responsibility for. Mr S has also suggested that OAM ought to have in some way advised or influenced the fund itself, or ensured that the fund directors’ discretion was applied fairly. I’m afraid I don’t agree that its obligations stretch that far. I agree OAM needed to act in investors’ best interests and with due skill and care. But I don’t think that it would be fair to extend that obligation to matters beyond those it had a regulatory responsibility for as AIFM or those which were set out in the prospectus of the fund. Mr S has made other detailed submissions about OAM’s fiduciary duties, and the obligation to exercise discretion on an informed basis. But for the reasons given above I’m not persuaded OAM itself had the discretion about which Mr S complains. However on these points I would note: • If I considered OAM had some obligation to consider whether the fund should apply for a tax reclaim, at best it could have suggested or recommended it to the fund’s board. • So to uphold the complaint I would need to be satisfied that OAM failed to consider an alternative course of action; that it would in fact have chosen an alternative course of action; that it would have recommended that course of action to the fund; that the fund would have followed that course of action; and that the course of action would have resulted in Mr S’s holding in fund N being worth more than it is. • I find there to be considerable doubt in all of those steps to the point that on the balance of probabilities I think it’s unlikely that Mr S would have been a different position even had OAM acted differently. • While it post-dates OAM’s involvement in fund N, the subsequent AIFM has explained that across 80 holdings in the Master fund, only one position was deemed economical to pursue a reclaim of withholding tax on. This was based on discussions with firm W and accounted for the cost of reclaims in various jurisdictions and W’s own fees.

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• I also note that a significant proportion of fund N’s holdings (and since 2023, all the residual holdings) were in Russian assets. The ability to reclaim withholding tax has been removed for Russian assets for UK investors since 2023 due to legislative action taken by both the Russian and UK governments. • Taking those factors together, I think it’s reasonably likely that pursuing withholding tax reclaims on fund N’s holdings would have been deemed uneconomical even if a more robust cost benefit analysis had been carried out. And that some of the assets wouldn’t have been able to have reclaims applied for successfully. Finally I will address Mr S’s comments on the way the fund accounts for any tax reclaims. He’s unhappy the fund’s NAV adjusts on the date of the reclaim being paid, not the date of the original dividend. This is written into the prospectus of the fund, and not something OAM or anyone else had any discretion over or choice about – a complaint about the fund’s structure isn’t rightly directed at the fund manager. In summary – I don’t think OAM was responsible for the decisions about fund N that Mr S complains of. But even if I’m wrong, I’m not persuaded on the evidence I’ve been provided that pursuing reclaims was such a likely profitable endeavour for the fund and by extension investors that it would have been an unreasonable exercise of discretion to choose not to pursue them. It follows that I don’t think it would be fair and reasonable to require OAM to pay Mr S any compensation. My final decision For the reasons I’ve given I don’t uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr S to accept or reject my decision before 27 April 2026. Luke Gordon Ombudsman

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