Cardif, a subsidiary of the French insurance company BNP Paribas Assurance, has been ordered by a French Court to pay €92,000 to a client for failing to inform her about the characteristics of a product.
Everest 2010, a fully capital-protected product, was sold in June 1999 and issued by Société Générale promising to pay at maturity 200% of initial capital, plus the performance of the worst-performing share among the twenty stocks underlying the structure.
According to the court filing, the client invested €120,000 in the product but when the product matured in 2010, the worst-performing stock had seen its level decreased by 76.59% since the product was launched in 1999. Therefore the capital return stood at 123.41% which meant the investor got her capital back, plus a profit of €28,000. However, the investor decided to submit a complaint to Cardif because she was expecting to double the capital invested.
The court backed the investor and ordered the French insurance company to pay her the difference between the amount she expected to receive – €240,000 – and what she actually obtained – €148,000 – meaning that BNP Paribas Assurance had to foot a bill of €92,000.
One of many
This decision comes at a time when the French structured products market has been surrounded by several cases involving mis-selling cases involving retail clients as well as municipalities.
Caisse d’Epargne was fined for deceptive advertising concerning its Doubl’O product in April 2014; in the meantime, a number of French investors on BNP Paribas’s Garantie Star 8 have asked the bank to refund its managements fees, after incurring losses from a product that was marketed as capital-protected. A French court has also ordered Dexia to substitute the variable rate charged to a French city in a structured loan for the statutory rate of interest.
“This case highlights the selling methods of insurance companies which display very attractive returns”, Féron-Poloni, lawyer of the Everest 2010 and Doubl’O investors, told SRP.
The latest court decision in France could encourage other subscribers to ask for financial compensation since this product sold more than €30m, according to Féron-Poloni.
Since this product was launched in 1999, the French regulator AMF has challenged on many occasions the way structured products are sold to retail investors.
In a recent interview, Oliver Eon, project manager at the AMF, told SRP that the regulator now examines all the marketing documents of structured products that are brought to market and often sends them back to the banks to make sure they do not mislead investors by providing over-optimistic scenarios or through risks not being explained clearly.
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French court forces Dexia to change structured loans rates