Insight & Analysis

Bank mis-selling claims demand commitment – and patience

Published: Aug 2021

Complaints about mis-selling of financial products continue to dog some of the world’s largest financial institutions, but proving wrongdoing is a complex and lengthy process for even the most sophisticated corporate client.

Building in city with Bank sign

In late June, it was reported that J García Carrión had received a payment in excess of €10m from Deutsche Bank to settle a claim that the bank had mis-sold foreign exchange derivatives to Europe’s largest wine exporter.

However, these reports merely served as a reminder of how few cases have entered the public domain, much less made it as far as the courts – which begs the question ‘are such cases particularly hard to prove?’

If a business thinks they have been mis-sold a financial product, the first thing to determine is the expiry of any potential limit periods. In general, a claimant will have six years from the date of the sale of the product to start litigation.

The next step is to start collecting relevant evidence such as emails, meeting notes, text messages and phone call recordings explains Sam Roberts, Partner at Cooke, Young & Keidan. “Courts place a huge premium on contemporaneous documents and having all of this in one place right at the outset will help to get the claim off on the right foot,” he says.

When assessing whether a claimant has a case, a good place to start is whether the claimant has been positively told something which was clearly untrue.

“Otherwise, it will be necessary to analyse what duties the seller might have owed to the claimant and whether any of these duties were breached,” says Roberts. “If so the claimant might be entitled to damages.”

Working out what was said or written, by whom and when is critical agrees Simon Hart, Partner and Head of the Financial Markets Disputes team at law firm RPC. “That might involve raking over a sales process which took place some time ago,” he acknowledges. “However, it will be much easier to get robust legal advice if the factual situation is clear and the contracts are available.”

Corporates should request all copies of correspondence leading up to and immediately after the transaction, including copies of the transaction (typically called a ‘confirmation’).

“We review all the information leading up to the transaction, including the previous history of transactions (including with other entities) and the experience and knowledge of the individuals at the corporate,” says Vedanta Hedging CEO, Abhishek Sachdev. “We then help them calculate the losses, which are often both direct and indirect.”

Having a proper understanding of the circumstances in which the alleged mis-selling arose is critical, which means reviewing contemporaneous documents and contracts and possibly speaking to those involved in the transaction.

“That is an area where the clients can help themselves,” suggests Hart. “There is often reluctance to spend money on a fact-find but the conclusions of the legal analysis and recommendations from the legal team will be stronger if there is confidence in the underlying facts.”

The other important aspect is getting an expert to give a preliminary view on whether the product in question was suitable, what an appropriate alternative product might have been, and the likely spectrum of loss.

Sachdev points out that there are various routes to potential resolution, which in the UK include making a complaint to the Business Banking Resolution Service or the Financial Ombudsman Service as well as the product provider in addition to the threat – and actual commencement – of litigation.

“The length of time it can take for a case to be settled and the costs involved will depend on the size of the dispute, the complexity of transaction, and the size of the corporate,” he says. “The time needed to reach an acceptable settlement can range from as little as eight weeks up to 24 months or more.”

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