Bridge over the Liffey in Dublin

The Sisters of Charity of Jesus and Mary v Morgan Stanley Case

Posted on 18/06/2012 · Posted in Expert Witness, Financial Litigation, Structured Products

Failure to redeem notes upon mandatory redemption

The Claimants were a diverse collection of investors including charities and individuals. The Defendants were Morgan Stanley and Saturns Investments Europe plc, one of Morgan Stanley’s special purpose vehicles.

Between 2005 and 2006 the Defendants marketed to Bloxhams, the largest of the Irish stockbrokers, structured notes. These notes were “hybrid structured euro constant maturity swap notes” and Dresdner bonds were the underlying collateral. Bloxhams sold €5.88million worth of the notes to the Claimants. The Claimants found the notes attractive because they offered a high rate of return: 6.25% for at least 4 years.

The claim focused on Defendants’ failure to redeem the notes when the underlying collateral bonds were downgraded in January 2009. The Claimants contended that the Defendants were required to redeem the notes in January given that the downgrade triggered mandatory redemption. In fact, the Defendants did not redeem the notes until June and this resulted in the Claimants losing a significant proportion of their investment. Meanwhile the Defendants made a substantial profit.

The Defendants claimed that the Claimants’ allegations were unfounded and that they had the opportunity to raise money themselves when redemption came in June. It took the step of joining Bloxhams to proceedings, claiming the stockbroker had incorrectly sold the notes. However, Bloxhams subsequently went into Liquidation.

The Defendants ultimately settled with the Claimants for an undisclosed figure.

Interested in dispute resolution services?

      Contact

Disclaimer: The above case summary is derived from publicly available information and is not intended to be anything more than a statement of the author’s views on the salient factors of the case. It is not intended and should not be understood to be legal advice of any sort. All views are solely those of the author and no use of the summary should be made without statements being checked against the source of information. Expert Evidence Limited takes no responsibility for the views expressed. The copyright of the summary is owned by Expert Evidence Limited but may be used with written permission which may be forthcoming on application through the contact us page. This news item is not intended to imply or suggest that Expert Evidence Limited was involved in the case, only that it is considered an interesting legal development.