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RBS forced to pay £1m settlement in derivatives mis-selling claim

Opal properties

Over four years ago, Martin Berkeley of Vedanta Hedging helped one of our clients, Mehnaaz Chaudhry, a businesswoman who undertakes social support and residential care services to more disadvantaged families in the London area, with litigation procedures against RBS.

Vedanta Hedging has assisted more than 400 corporates to settle derivative disputes with their banks, but the overwhelming majority involve strict confidentiality clauses.

In a interesting turn of events, this settlement turned out to be one of the rare cases in which the client refused to sign a confidentiality agreement. It is due to that reason that we can report on the fact that the Royal Bank of Scotland was forced to settle on a High Court claim over the mis-selling of two of its derivative products in 2007. Despite paying a total financial cost in excess of one million pounds, RBS continues to deny any liability in this case. The settlement received included repaying Ms. Chaudary 92% of her direct losses.

Another of our leading derivatives experts, Mr. Abhishek Sachdev, of FCA-authorised financial risk management consultancy Vedanta Hedging stated:

“The customer did not fully understand the Collars and therefore RBS should not have sold them.   RBS failed to fully explain the risks associated with the Collars, in particular break costs.  Had the customer fully understood the complexity and risks of the Collars, she would not have entered into them and would have chosen alternative hedges. The Collars were over-priced at inception by between 149% and 169% whereas the customer could have had more effective hedges at a fraction of the cost.”

“The FCA-agreed IRHP review scheme has failed to ensure customers get fair redress and instead has significantly reduced the cost of compensation that is truly owed by banks to victims.” 

To learn more about this case and read how Vedanta Hedging helped Ms.Chaudhry, please click here.