A number of French investors in Garantie Star 8 from BNP Paribas have asked the bank to refund its managements fees, after incurring losses from a product that was promoted as capital protected. The issuer argued that the performance of the product, before fees, was positive.
The affected investors are being represented by lawyer Daniel Richard - who was involved in a similar case in 2011 regarding the bank's Garantie Jet 3 which incurred losses of 10% on clients' initial investments - and who has led several other lawsuits from disgruntled structured products investors, including the case against Caisse d'Epargne group for the mis-selling of the Doubl'O range of structured products.
Garantie Star 8, which was launched in 2001, was linked to a basket of shares and promised to pay the best of either 100% capital return at maturity or 130% of the average rise in the basket, with each share capped at 120%.
Investors were told that despite the performance of the underlying assets, they would recover the capital invested. However, because the performance of the shares was insufficient to cover the bank's management fees, investors saw a loss on the overall transaction. According to the product's literature, the management fees were a maximum of 2.50% per annum.
BNP Paribas set a precedent when it agreed to refund its management fees to investors in Garantie Jet 3, as a result of the structure's poor performance. Garantie Jet 3, also launched in 2001, was similar to Garantie Star 8 in terms of its underlyings and management fees.
In order to settle the case, the French issuer eventually granted a refund of the management fees to those clients who had held the product until maturity.
The bank said in a statement that it had not charged management fees of more than 1% per annum for either Garantie Jet 3 or Garantie Star 8.