A High Court judge has dismissed a case brought against advisers working at Credit Suisse Securities and investment firm Plurimi Capital relating to a client’s $31.7m (£21.1m) loss against structured investments, ruling that the investor took risks against advice given to her.
CSS and Plurimi were alleged to have failed to explain to investor Basma Al Sulaiman that the 23 structured notes that she purchased with money lent by Credit Suisse would be ‘pledged’ to the bank as collateral.
They were further said to have failed to make clear that the bank could call upon her to provide additional collateral in the shape of ‘margin calls’ if the value of the notes dropped - and that if she did not provide such collaterol the notes could be sold.
Ms Sulaiman described herself as an “inexperienced investor” who was “in the hands of her advisers”. She said she relied on the advisers to tell her what the risks were and that they led her into taking risks she would never have taken.
However, in a High Court judgement dated 1 March 2013, the judge ruled that neither firm were in breach of their duties and that they they explained both in documents and orally what the risks were in leveraged investment and structured notes.
The judgement further states that the investor caused the losses herself by her own “extraordinary and unreasonable decision” not to meet a margin call when she was able to do so after ignoring advice to sell more notes.
Following the collapse of Lehman Brothers and of two Icelandic banks in September and October 2008 - and the subsequent collapse in both the equities and fixed interest markets - the value of the notes Ms Sulailman had purchased dropped significantly.
On 8 October 2008, Credit Suisse informed Plurimi that it would be making margin calls on a number of clients, including Ms Sulaiman.
Later in the month, the bank changed its permitted loan-to-value ratio, requiring greater collateral to be provided against existing loans. This resulted in an increased margin call which Ms Sulaiman failed to meet, following which Credit Suisse liquidated notes in her portfolio.
The sum realised from the sales was less than the amount she owed and Credit Suisse appropriated deposits and called guarantees to make up the deficit.
The judgement states: “The way in which the claim has been pursued with varying and conflicting statements illustrates the lack of foundation for her complaints and the irrationality of her attempts to hold others liable for her own risk- taking, the market collapse of October 2008 and her own decision not to take the obvious course when presented with margin calls.”
