LEXLAW Solicitors & Barristers
The Court of Appeal (Sir Terence Etherton MR, Longmore LJ and Newey LJ) handed down judgment in the highly anticipated appeal from Asplin J’s decision in Property Alliance…
The Property Alliance Group (PAG) appeal against RBS concerning interest rate swaps mis-selling, LIBOR manipulation, and GRG treatment was dismissed by the Court of Appeal in 2018. While PAG lost on the facts, the Court clarified key legal points: banks must exercise valuation rights for legitimate commercial purposes, not maliciously, and duties owed vary by case context. The judgment impacts many pending mis-selling claims, offering guidance on banks’ responsibilities and contractual rights. PAG’s LIBOR manipulation claim failed due to lack of evidence on sterling LIBOR but remains significant for other currencies.
The FCA regulates authorised firms under the Financial Services and Markets Act (FSMA) 2000, overseeing conduct and prudential standards. It authorises firms, supervises compliance, investigates breaches, and enforces rules via fines, bans, and public censure. The FCA’s remit focuses on “regulated activities,” but it also monitors firms’ overall behaviour, including some unregulated actions linked to regulated firms. It holds senior managers accountable under the Senior Managers and Certification Regime (SMCR). The FCA aims to protect consumers, uphold market integrity, and promote competition, balancing its powers with statutory limits set by Parliament and Government.
UK Parliament unanimously condemned RBS’s Global Restructuring Group (GRG) for its systemic mistreatment of SMEs, describing it as a parasitic unit engaged in asset stripping and aggressive litigation tactics. MPs highlighted GRG’s role in artificially distressing viable businesses, undervaluing assets, and employing harsh recovery strategies during 2008-2013, leading to widespread financial harm. The FCA’s delayed and redacted report faced heavy criticism, with calls for transparent accountability, a Financial Services Tribunal, whistleblower protections, and full release of investigations.
The leaked 2009 internal memo from RBS’s Global Restructuring Group (GRG), titled “Just Hit Budget!”, reveals aggressive tactics aimed at extracting maximum profit from struggling SME customers. The memo outlines a systematic approach to pressure businesses, including leveraging fees, forcing deal signings, and deliberately letting customers fail – referred to chillingly as “let customers hang themselves.” This memo exemplifies the toxic culture within GRG that led to severe financial distress for many SMEs.
The FCA has issued a strong warning over widespread mis-selling of complex and risky Contracts for Difference (CFDs) to retail investors, finding poor target market definitions, inadequate due diligence, and weak conflict of interest management among providers. Many unsophisticated consumers suffer significant losses, with 76% losing money, including pension funds unknowingly invested in CFDs. The FCA’s crackdown includes tougher regulations and possible supervisory interventions to protect vulnerable investors. Consumers mis-sold CFDs can seek redress through complaints, the Financial Ombudsman, or legal claims.
The High Court ruled in Abdullah v Credit Suisse that the bank mis-sold complex structured products to a conservative Kuwaiti family, breaching statutory duties under sections 138D and 150 of the Financial Services and Markets Act 2000. The court found Credit Suisse failed to assess the clients’ risk tolerance and provided misleading advice, resulting in a $30 million loss. Key defences by the bank, including claims of contributory negligence and financial suicide, were rejected. This landmark case clarifies banks’ obligations under FCA Conduct of Business rules on suitability and fair communication in sales of complex financial products, offering hope for mis-selling victims.
Ross McEwan, CEO of RBS, apologised for past mistakes with SME customers in the Global Restructuring Group (GRG) but rejected key critical findings from the FCA report. He acknowledged some failings like poor communication and complaint handling but denied systematic misconduct or direct causation of insolvency by RBS. McEwan highlighted major cultural and operational changes at RBS since and emphasized ongoing compensation and complaints processes agreed with the FCA. The FCA’s Andrew Bailey described RBS’s stance as “unfortunate,” with potential enforcement action underway.
Our client, the charity Wenta has gained ground in its claim against NatWest/RBS over the mis-selling of a derivative (IRHP). Wenta alleges the banks breached contractual, tortious, statutory, and fiduciary duties, causing financial loss. The case involves disputes over suitability, disclosure, and a flawed and unfair review process by the banks. Disclosure battles have forced the banks to reveal key sales training manuals and review materials. Litigation continues with trial or secret settlement expected soon.
The Court of Appeal is set to consider whether to grant permission for Property Alliance Group Ltd (PAG) to appeal a High Court ruling that dismissed its claims against RBS. The case involves allegations of interest rate swap mis-selling, LIBOR manipulation, and mistreatment by RBS’s Global Restructuring Group (GRG). The High Court had found PAG to be a sophisticated client with financial expertise and ruled against claims based on lack of specific false statements and exclusion clauses. The appeal will test key issues in sales duties, advisory roles, and the impact of GRG’s conduct on businesses.