By Ian Fraser
Published: Sunday Herald
Date: November 25th, 2012
Fund managers who invested their customers’ money in Royal Bank of Scotland’s disastrous £12 billion rights issue in 2008 but who failed to alert clients to the existence of a shareholder-led legal action against the bank, are vulnerable to being sued by their clients, according to a leading Scottish lawyer.
In an opinion prepared for an independent financial adviser representing high-net-worth clients, John Campbell QC said that any fund manager who steered clients into the controversial rights issue, but failed to alert investors to the RBOS Shareholder Action Group’s existence, and/or failed to take part in the group’s action, would be vulnerable to being sued – but only if the action proves successful.
He added: “A failure to draw clients’ attention to the existence of RBoSSAG and its intentions is prima facie negligent conduct and therefore actionable.”
Campbell said that any fund manager, which he takes to include asset-management firm, nominee account, broker, wealth manager and IFA, that failed to inform and advise their client of the existence of RBoSSAG by the cut-off date of April 2014 “is likely, in my opinion, to be seen to have been negligent and to have a case to answer.”
Campbell acknowledged that different fund managers and intermediaries have a range of types of contract with their clients, but said contractual terms and conditions “will be subsumed under the overarching principle of the duty of reasonable care”.
The action group alleges that, through “misleading statements” and “critical omissions”, RBS and four of its ex-directors – Fred Goodwin, Sir Tom McKillop, Johnny Cameron and Guy Whittaker – misled investors into putting £12bn into a rights issue in June 2008. Despite reassurances at the time, the Edinburgh-based bank was near bankrupt four months later, its shares near-worthless. It only survived thanks to a £45.5 billion bailout by the UK taxpayer.
The RBOS Shareholder Action Group, advised by law firm Bird & Bird and Philip Marshall QC, is putting the finishing touches to proceedings which will be issued in London’s High Court in mid-December. The action group recently put £15 million of adverse costs cover into the court. RBS and its ex directors are represented by Herbert Smith.
So far 12,000 individual investors and 100 institutional investors have joined the legal action. Institutional members of the action group include Collins Stewart, Brewin Nominees, Deutsche Bank, SG Hambro, HSBC Global Custody, Northern Bank, NatWest Stockbrokers and Dutch pensions group MN Services. RBS declined to comment.
An edited version of this article was published in the Sunday Herald on November 25th, 2012