Royal Bank of Scotland and former directors face class action suit
04 April 2013
Shareholders of Royal Bank of Scotland have launched a class action suit against the bank and its former directors including ex-chief executive Fred Goodwin, seeking damages to the tune of £4 billion.
Thousands of shareholders belonging to the RBoS Shareholders Action Group also has on board 100 institutional investors, including HSBC, Deutsche Bank, Credit Agricole and Collins Stewart, as also a number of local authority pension funds, churches and charities, all of whom lost money in the bank's 2008 rights issue.
According to the action group, the former directors "sought to mislead shareholders by misrepresenting the underlying strength of the bank and omitting critical information" from the rights issue prospectus.
The group that represents over 12,000 private shareholders, many of whom are pensioners, has launched proceedings against Goodwin, ex-chairman Tom McKillop, the former head of investment banking Johnny Cameron, ex-finance director Guy Whittaker, and the bank itself.
This comes as the second claim lodged against the lender over the past few days. Last week, it emerged that the bank was being sued for misleading investors, in a joint claim brought by Dutch bank ING and several pension schemes.
The action group argued that the alleged failings meant that under the terms of the Financial Services and Markets Act, RBS was liable for losses that investors had sustained with their participation in the rights issue. It added, it was estimated that the final claim might be as much as £4 billion.
RBS launched the £12 billion rights issue to shore up its balance sheet following its disastrous acquisition of the Dutch bank ABN Amro. The RBS share price, however, collapsed by 95 per cent within months, and it had to be bailed out by taxpayers in October 2008.
According to a spokesman for the group, this was a giant step forward for the many thousands of ordinary people who lost money as the result of inexcusable actions taken by banks and their directors in the financial crisis.
Now, for the first time, some of these directors would have to answer for their actions in a British court, he added.