Coutts fights back after fresh attack over AIG
Private bank Coutts has rejected fresh criticism that it gave poor advice to its clients on investing in a troubled £6bn (€6.4bn) money-market fund run by AIG, becoming the latest bank to come under fire for allegedly mis-selling the product.
The UK bank was responding to an attack by Sir Keith Mills, the entrepreneur behind Nectar loyalty cards in the UK, who has launched a website to encourage Coutts customers to join forces in a combined action against Coutts.
In an open letter published today, he said: "Given the negative press reports about the future of AIG, I queried with Coutts...the safety of keeping my money with AIG...but they replied that they did not have concerns about these bonds, so I retained them."
Mills urges other Coutts customers who have similar grievances to visit his website, the Coutts AIG Action Group, with the objective of holding Coutts to account and "obtaining fair compensation from them."
Coutts, part of Royal Bank of Scotland, majority owned by the UK Government, said in a statement that the product was sold with appropriate advice and was compliant with the FSA regulations. The bank said at the time of sale it was made clear that the investment was low risk, not risk free, and it was explained that the value of the investment could go up as well as down.
It added: "Coutts has been lobbying AIG on behalf of all its clients affected by this to negotiate the best outcome for them and have remained in active dialogue with our clients throughout the period. We recognise that some clients may need access to cash and we will make available a loan facility to borrow up to 100% of the face value of the fund at a competitive rate."
Sir Keith Mills' lobby group is the second of its kind to be launched by angry AIG clients, implying a split of approach. The AIG Investors Action Group advises aggrieved clients of every bank which sold the fund. It was set up in October by Joseph Hill, a criminal lawyer.
The group has appointed lawyers Field Fisher Waterhouse to advise members, and have lobbied Chancellor of the Exchequer, Alistair Darling, Home Secretary Jacqui Smith and The Banking Ombudsman requesting a full investigation.
The AIG enhanced fund was suspended earlier this year following a string of redemption demands by wealthy individuals worried by problems at AIG, now rescued by the US government. The fund's value has suffered as a result of its exposure to credit instruments which have crashed in value as a result of the credit crisis.
The banks that have confirmed marketing the AIG enhanced notes to clients include Barclays Wealth, UBS, HSBC, Coutts and Lloyds TSB, all of whom have confirmed they are working hard to get the best result they can for their clients.
In November, UK wealth adviser St James' Place became the first adviser to agree to compensate clients for losses they have incurred on their investment in the AIG fund.
St James' expects to make them a goodwill payment totalling £6.9m, which will be calculated by reference to the fallen value of their investment in April 2009. The group's client assets in the AIG fund are £69m against its total value of £5.7bn. Other banks, to date, have said that they are not guilty of mis-selling.
--write to twilkinson@efinancialnews.com
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