The Dubai International Financial Centre Court (DIFC Court) ruled last week in favour of a prominent Kuwait-based business family in its case against Bank Sarasin-Alpen and its Swiss parent Bank Sarasin.
According to the court ruling, Bank Sarasin-Alpen provided “negligent” investment advice to the Al Khorafi family. The Kuwait-based business family filed a case claiming that the family lost about $75m after the bank and its parent company recommended complex financial products instead of capital-protected instruments as they originally requested, according to a claim filed in December 2009.
“It is said on behalf of the defendants that this is yet another case arising out the global financial crisis in 2007 to 2008 where investors are seeking to recover from their bankers the losses they suffered by reason of the dramatic falls in the values of their assets on the markets,” said deputy chief Justice John Chadwick in the ruling. “I do not take that view. The present is a clear case of miss-selling unsuitable investments to an unsophisticated investor.”
According to the court ruling, Bank Sarasin-Alpen was in breach of duties of care as it advised the Al Khorafi family to invest in structured notes that were not suitable to meet the family’s investment objectives.
The US$200m investments were funded by loans made to the Al Khorafi family in part by Al Ahli Bank Kuwait (ABK) and in part by Bank Sarasin. In November 2008, said the ruling, Bank Sarasin made margin calls which the Al Khorafi family did not meet, suffering substantial losses when Bank Sarasin closed out the structured notes.
The Al Khorafi family claims it intended to invest in capital-protected products that would provide income to meet interest payments on the loans and generate a surplus, but the bank recommended products that did not guarantee the capital invested.
According to the ruling, Bank Sarasin-Alpen failed to advise adequately as to the risks associated with such products and failed to assess whether such products were suitable for the claimants, and should pay compensation to the family.
SRP understands that Bank Sarasin-Alpen is considering an appeal. Calls to Bank Sarasin-Alpen requesting comment were not returned by press time. Click here to read the full ruling.