RBS to be sued for misleading investors in the United States

January 15th, 2009

I’ve just heard that the Royal Bank of Scotland is to be sued for misleading investors ahead of its £12 billion rights issue last year. This could be the first of several such actions by angry investors who believe that the state-owned bank, which was led by Sir Fred Goodwin until the government sacked him last year, misled US investors in the first half of 2007.

The law firm Izard Nobel LLP has filed a class action in the US District Court for the Southern District of New York on behalf of investors who bought RBS American depositary shares (ADSs) from June 2007 until January 12, 2009. Specifically the bank stands accused of using “materially false and misleading” information in the registration statement and prospectus issued in connection with the bank’s June 2007 initial public offering of 38 million non-cumulative dollar preference shares, series “S”.

Here I quote from an Izard Nobel press release :

Specifically, the following facts were omitted from the Registration Statement: (i) defendants’ portfolio of debt securities was impaired to a much larger extent than RBS had disclosed; (ii) defendants failed to properly record losses for impaired assets; (iii) the Company’s internal controls were inadequate to prevent RBS from improperly reporting its debt securities; (iv) the Company’s participation in the consortium which acquired ABN AMRO would have disastrous results on the Company’s capital position and overall operations; and (v) the Company’s capital base was not adequate enough to withstand the significant deterioration in the subprime market and, as a result, RBS would be forced to raise significant amounts of additional capital.

Investors who bought the ADRs have until March 13 to request that the Court appoint them as lead plaintiff of the class. A lead plaintiff is a class member that acts on behalf of other class members in directing the litigation.

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Posted by Ian Fraser on Jan 15 2009. Filed under Blog. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry