AIG losers’ threat to sue banks
£1m clients accuse wealth managers of mis-selling failed American insurer’s fund as ‘low risk’
Kathryn Cooper and Danny Fortson
FOUR of Britain’s top private banks have been threatened with legal action by wealthy clients who face losses of up to 25% on money placed with the beleaguered American insurer AIG.
The group of investors has written an open letter to Barclays Wealth, HSBC, Coutts and Swiss giant UBS, claiming they were mis-sold the AIG Premier Access Bond Enhanced fund.
Sir Keith Mills, founder of Air Miles and Nectar, is believed to be a member of the victims’ group. Top Gear presenter Jeremy Clarkson and New Star fund manager Tim Steer have also seen their cash frozen.
The £6 billion AIG Enhanced fund was a money-market fund promoted as a “low-risk alternative to an instant-access deposit account”, the letter said. However, AIG was forced to close it in September after fears of its collapse caused a run on the fund.
Investors can get back half their investment now, but the other half must be locked up for more than three years if they want to reclaim it without further loss. If they cash in now they could lose up to 25%.
There are 5,500 investors in the fund with an average holding of about £1m. AIG Victims, the online action group that is claiming mis-selling, represents about 500 of them. It said some members have as much as £25m to £30m tied up in the scheme, with one investor holding as much as £70m.
The action group’s letter calls on the private banks to underwrite their clients’ losses. If not, it threatens to launch a class-action lawsuit for around £1 billion.
“There is overwhelming anecdotal evidence, all of which is being documented, that this was a commission-driven sale and that the individual salespeople knew little of the details of this product and thus were not able to properly advise clients. We are seeing evidence of systemic failure throughout your organisations, not the odd case of mis-selling, the letter said.
The letter has been sent out ahead of the November 25 deadline by which investors must decide what to do with the half of their fund they can’t immediately access. They can either cash it in now, with a loss of up to 50% (or 25% of their total holding), or they roll it into a new scheme, the Protected Recovery fund. This has a “guarantee” they will get back their investment in three and a half years’ time, but they will get no interest in that period - and many investors say they need their money now.
Richard Dale, the former head of equity research at Citigroup in London, said: “This was sold as absolutely triple-AAA, risk-free investment, but it is the only place now where cash is being locked up.
“If I had put my money with an Icelandic bank I would have got it back by now.” He added: “If they are happy about the quality of the assets they should take them onto their own balance sheet and pay back the cash in full now.”
The problems arose because the Enhanced Fund invested in AAA and AA-rated debt issued by companies such as US conglomerate GE, the value of which plunged due to the credit crunch. (AtW's comment: yeah triple A stuff -
) The assets have been valued by a third party, Cairn Capital. It estimates that if they were sold now investors would incur losses of up to 50%. Alternatively, AIG Life will sell off the assets over the next three years, giving investors a better chance of recouping their losses.
Some investors put the entire proceeds from the sale of their businesses or homes into the scheme. Zoe-Louise Ghirarduzzi, whose mother died in the September 11 attacks on New York in 2001, entrusted her compensation payment to AIG through UBS and now faces heavy losses.
A spokesman for Barclays Wealth said: “We take any allegation of mis-selling very seriously and we investigate any incident thoroughly and on a case-by-case basis. We will continue to keep close to our clients as we work through the AIG situation.”
Coutts and HSBC Private Bank also said they were holding talks with affected clients, while UBS declined to comment.
A spokesman for Coutts said: “In line with our usual client proposition we have been holding individual discussions with all of clients affected by this issue to find the best solution for them.”
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No big Lehman lawsuits yet - looks like the main reason is that nobody wants to admit publicly they lost out money in it, and also the amount thats recoverable seems so low that might as well not bother and save on legal fees...
£1m clients accuse wealth managers of mis-selling failed American insurer’s fund as ‘low risk’
Kathryn Cooper and Danny Fortson
FOUR of Britain’s top private banks have been threatened with legal action by wealthy clients who face losses of up to 25% on money placed with the beleaguered American insurer AIG.
The group of investors has written an open letter to Barclays Wealth, HSBC, Coutts and Swiss giant UBS, claiming they were mis-sold the AIG Premier Access Bond Enhanced fund.
Sir Keith Mills, founder of Air Miles and Nectar, is believed to be a member of the victims’ group. Top Gear presenter Jeremy Clarkson and New Star fund manager Tim Steer have also seen their cash frozen.
The £6 billion AIG Enhanced fund was a money-market fund promoted as a “low-risk alternative to an instant-access deposit account”, the letter said. However, AIG was forced to close it in September after fears of its collapse caused a run on the fund.
Investors can get back half their investment now, but the other half must be locked up for more than three years if they want to reclaim it without further loss. If they cash in now they could lose up to 25%.
There are 5,500 investors in the fund with an average holding of about £1m. AIG Victims, the online action group that is claiming mis-selling, represents about 500 of them. It said some members have as much as £25m to £30m tied up in the scheme, with one investor holding as much as £70m.
The action group’s letter calls on the private banks to underwrite their clients’ losses. If not, it threatens to launch a class-action lawsuit for around £1 billion.
“There is overwhelming anecdotal evidence, all of which is being documented, that this was a commission-driven sale and that the individual salespeople knew little of the details of this product and thus were not able to properly advise clients. We are seeing evidence of systemic failure throughout your organisations, not the odd case of mis-selling, the letter said.
The letter has been sent out ahead of the November 25 deadline by which investors must decide what to do with the half of their fund they can’t immediately access. They can either cash it in now, with a loss of up to 50% (or 25% of their total holding), or they roll it into a new scheme, the Protected Recovery fund. This has a “guarantee” they will get back their investment in three and a half years’ time, but they will get no interest in that period - and many investors say they need their money now.
Richard Dale, the former head of equity research at Citigroup in London, said: “This was sold as absolutely triple-AAA, risk-free investment, but it is the only place now where cash is being locked up.
“If I had put my money with an Icelandic bank I would have got it back by now.” He added: “If they are happy about the quality of the assets they should take them onto their own balance sheet and pay back the cash in full now.”
The problems arose because the Enhanced Fund invested in AAA and AA-rated debt issued by companies such as US conglomerate GE, the value of which plunged due to the credit crunch. (AtW's comment: yeah triple A stuff -
) The assets have been valued by a third party, Cairn Capital. It estimates that if they were sold now investors would incur losses of up to 50%. Alternatively, AIG Life will sell off the assets over the next three years, giving investors a better chance of recouping their losses.Some investors put the entire proceeds from the sale of their businesses or homes into the scheme. Zoe-Louise Ghirarduzzi, whose mother died in the September 11 attacks on New York in 2001, entrusted her compensation payment to AIG through UBS and now faces heavy losses.
A spokesman for Barclays Wealth said: “We take any allegation of mis-selling very seriously and we investigate any incident thoroughly and on a case-by-case basis. We will continue to keep close to our clients as we work through the AIG situation.”
Coutts and HSBC Private Bank also said they were holding talks with affected clients, while UBS declined to comment.
A spokesman for Coutts said: “In line with our usual client proposition we have been holding individual discussions with all of clients affected by this issue to find the best solution for them.”
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No big Lehman lawsuits yet - looks like the main reason is that nobody wants to admit publicly they lost out money in it, and also the amount thats recoverable seems so low that might as well not bother and save on legal fees...
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