industry news | Disgruntled investors set to file civil suit against product providers
The Costa del Sol Action Group, a group of British expatriate pensioners living on the coast of Spain, are planning to file a civil action for damages against Irish product providers, and have appointed Irish solicitors McKeever Rowan in Dublin to represent them.
According to Gerald Walsh, a solicitor at McKeever, it is as yet premature to discuss the basis of the Group's civil action, but discussions with barristers are already taking place and a suit "will almost certainly be happening."
This development has emerged as Interpol, the Spanish financial services regulator and the local police conduct an investigation of 13 unlicensed broker firms who have been accused of mis-selling. The investigation was ordered by the Supreme Criminal Court in Madrid in June.
The allegations have been raised by the Action Group, which represents 180 British families, largely pensioners, who have suffered substantial financial losses after their dealings with these brokers. The group alleges that it has been a victim of mis-selling practices, which involves combined investments in the region of £28m.
According to David Klein, who leads the action group, product providers should be held accountable on the grounds that they endorsed these unlicensed brokers with marketing efforts in contravention of EU and Spanish law. This is denied by the providers in question.
"We are holding product providers partly liable for our losses, for having used these unlicensed brokers," said Klein who established the action group after losing three-quarters of his savings which he claimed (a disputed claim), he had asked to be put in low-risk investments.
Providers of investment products, whether these are domiciled in the EU or not, are being accused of marketing without registering with the regulator.
Product providers have so far rebutted claims they have had any direct involvement with the brokers, or that they have acted out of line with EU law.
According to Klein, product providers allowed brokers in the area to use their logos in advertising and offered brokers generous commissions.
"These product providers have been involved in the selling process. They have hosted seminars and presentations in five-star hotels, and have placed advertisements in the papers for the public to come along. We are opening a very big can of worms," said Klein.
According to Bill Blevins, an adviser in the region who has not been embroiled in the saga, the issue has generated some very bad PR for financial advisers in the region. "It is a huge issue at the moment," he said. All advisers with clients in Spain fear that they will be tarred with the same brush. Although his firm, Blevins Franks, does not act as intermediary for any financial services company, but is involved in setting up trusts in Malta, Blevins said that, as a result of this controversy, his firm will apply for a licence in Spain.
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