Old Mutual International, the international investment products arm of Old Mutual Wealth, is “taking legal action” against Zurich-based Leonteq Securities AG “and related parties”, for “the making of false statements” in connection with the levels of commission paid to advisers on Leonteq structured products.
OMI said it was taking the action in an effort to provide “redress in respect of…significant financial losses” it said had been suffered as a result of investment in the Leonteq products.
“Had the true level of commission been disclosed, the products would not have passed Old Mutual International’s criteria, and no investments would have been made,” OMI said in a statement.
OMI didn’t say which court it was taking the action in, nor what level of financial damages it was claiming, nor who, if not OMI itself, had suffered the losses.
The names or types of entities it is also taking action against also weren’t given.
A Leonteq spokesperson said that the company couldn’t comment on the legal matter. However, he added, “it is important to note that Leonteq is disclosing the applicable fees for its issued products on the termsheet or other relevant legally binding product documentation”.
Leonteq AG, formerly EFG Financial Products Holdings AG, is a major issuer of structured products. In addition to Zurich, it has offices in London, Geneva, Monaco, Guernsey, Frankfurt, PAris, Amsterdam, Singapore and Hong Kong.
Peter Kenny, Old Mutual International managing director, said said the company was taking a “firm stand against the behaviour which has led to such devastating consequences”.
“As with all legal cases, there is a long road ahead, but we will do all that we can to bring to account those responsible.”
Call to action
Separate to its legal action against Leonteq, OMI said it is “encouraging all market participants to help rid the industry of inappropriate structured products, which are having a damaging impact on investor confidence and outcomes”.
Already, the company noted, it has taken action in recent years to tighten its own criteria with respect to structured products, including introducing a maximum fee level, and in some cases, banning certain types of structured products from certain institutions.
“Not all structured products are bad, and they can be useful for clients who want a degree of capital protection whilst also providing exposure to investment markets or a fixed return,” OMI said.
“However, many structured products are often very complex in design. Regrettably, some investors and advisers will not always possess the depth of knowledge required to fully understand the risks and rewards associated with investing in such products.”
“Investors deserve fair pricing, simplicity and transparency,” Kenny added. “It is the responsibility of all market participants to deliver against these requirements for the international financial services industry to have a sustainable future with good customer outcomes provided by trusted brands.
“I would encourage all industry participants to work together to eradicate poor practices once and for all.”
Told about OMI’s lawsuit, a number of financial advisers welcomed it, and said it could be potentially significant. Among them was UK-based Montfort managing director Geraint Davies, who said it could help to inspire other life companies to “start asking questions” about the circumstances under which certain investments held inside their own product wrappers, which subsequently had been found to be deeply problematic, had been sold to their clients.