UK, US pension funds take Royal Bank of Scotland rights issue claim to High Court

Institutional investors seek compensation over 2008 prospectus

Some of the largest pension funds in the UK and the US, including the £10.9bn (€12.9bn) Mineworkers Pension Scheme, the £8.7bn British Coal Staff Superannuation Scheme and the $38.16bn Teachers Retirement System of Illinois are among the investors that have launched a major compensation claim against the Royal Bank of Scotland.
Also involved in the action, which is not related to a separate case being brought by the RBoS Shareholder Action Group, include Electricity Pensions Trustees and asset managers ING and Deka. In total 21 institutional investors are involved in the new action.
The case in the UK High Court revolves around the bank’s £12bn rights issue in 2008, just months before it collapsed. The institutions are suing RBS under Section 90 of the Financial Services and Markets Act 2000, covering the accuracy of prospectuses.
Law firm Stewarts Law, which is acting for the investors, did not disclose the size of claim, but media reports have put it at over £200m.
The investors allege the rights issue prospectus “was defective in that it contained material mis-statements and omissions”.The eight-page claim adds: “The claimants maintain that although the prospectus portrayed an image of the bank being in a state of financial good health and stability, the reality was very different and that had the truth been known, the take-up of shares under the rights issue would have been severely impacted.”
Clive Zietman, head of commercial litigation at Stewarts Law, said: “Unless the matter can be resolved amicably, the claimants intend to pursue this litigation vigorously and through to trial in order to seek appropriate redress from the court.”
The Lawyer reported that Herbert Smith Freehills has been instructed to defend RBS’s claim while Andrew Onslow will head up the shareholders’ case.
Meanwhile, a US judge late last week dismissed a substantial part of investor claims relating to banks’ alleged rigging of the LIBOR interest rate. US District Judge Naomi Reice Buchwald granted the banks’ motion to dismiss the plaintiffs’ federal antitrust claims and partially dismissed their claims of commodities manipulation. Reice Buchwald also dismissed racketeering and state-law claims.
In a 161-page opinion, she acknowledged the ruling was “unexpected,” given that several defendants had already paid out billions in penalties.