Brown Shipley is compensating clients who saw their investments in Anglo Irish and Lambay bonds wiped out after the bank was nationalised in 2009.
The private bank has offered compensation to clients with holdings in an Anglo Irish bond with a maturity of 2049 and a perpetual floating share issued by its subsidiary Lambay Capital.
In the fund’s institutional investors’ report from November of last year, the group noted it had over £5.8 million invested in the Anglo Irish Bond with its price and coupon both valued at zero. The report makes no mention of the Lambay bond. The private bank declined to disclose the number of clients affected or the amount invested across private client portfolios.
Investment managers at Brown Shipley bought the Lambay bond for a number of private clients in the summer of 2007 and the Anglo Irish bond in the spring of 2008.
The private bank is understood to be in negotiations with clients over the offers, while a number have referred their complaints to the Financial Ombudsman Service (FOS), taking the view that the investment in bank debt after the onset of the financial crisis exposed their capital to risks they were not prepared to take.
Wealth Manager understands that in some cases Brown Shipley has said the bond investments were suitable but the proportion of capital invested may not have been, so it is prepared to pay compensation on the proportion of the investment that it deems was appropriate.
However, in correspondence from the FOS seen by Wealth Manager, it said that if a client’s risk profile was low, further investments in these bonds in 2008 after the collapse of Northern Rock were not suitable.
It concluded that Brown Shipley should put the client in the same position they would have been in if they had not been advised to invest in the bonds after 2008.
A spokesperson from Brown Shipley said: ‘Brown Shipley seeks to take care of every aspect of clients’ investments with the creation of an agreed, bespoke investment strategy based on a thorough understanding of their objectives, risk profile and financial circumstances.’
An FOS spokesperson said it was unable to comment on cases until a final decision has been made.