Basma Al Sulaiman v Credit Suisse Securities (Europe) Limited and Plurimi Capital LLP

Posted on 01/03/2013 · Posted in Expert Witness, Financial Litigation, Structured Products

Investor’s knowledge, advice and impact of financial crisis on a private banking client

The Claimant, Basma Al Sulaiman, was a Saudi Arabian investor who had been married to Walid Al Juffali, a member of one of Saudi Arabia’s richest families. After a reputed divorce settlement of $40m in 2003, and relying on the advice of the Defendants, she sought to invest $28m of the settlement into a structured products portfolio consisting of 23 notes almost all of which were leveraged by loans from the bank. Banks create structured notes by packaging debt with derivatives to offer customised investment instruments to clients of their private banking divisions and institutional investors. Structured products in general and in particular ones backed by certain types of mortgage loans fell in value in the September/October 2008 market crisis and the Claimant lost $31m after failing to respond to margin calls made by the bank. She was initially advised by Credit Suisse Securities and subsequently by Plurimi Capital, both of which were Defendants in the Commercial Court. The management of Plurimi Capital originally worked for Credit Suisse and during the period in question went off to set up their own business.

The Claimant sought damages for breach of statutory duty and negligence against both Defendants on the grounds that (1) the sophisticated investments recommended were unsuitable for her investment profile and (2) if the risks of such investments had been explained to her, she would not have proceeded.

During the course of litigation it became clear, through both protracted evidence and disclosure of documents (file notes, emails etc), that the Claimant ‘s wealth and investment knowledge was much higher than was at first suggested. Furthermore, Mr Justice Cooke found that Plumiri had fully explained (both in documents and orally) the risks of leveraged investments and structured products and that their advisory practices were sound. It was the Defendant’s own decision not to take the obvious course when presented with margin calls’ and the case was dismissed with costs against the Claimant.

Link: Basma Al Sulaiman v Credit Suisse Securities (Europe) Limited and Plurimi Capital LLP [2013] EWHC 400 (Comm)

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