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Precipice bonds face misselling claims

The industry could face another raft of misselling claims when the next wave of structured products mature this month despite the rallying markets, City law firm Reynolds Porter Chamberlain has warned.

RPC points out that Scottish Life International, Scottish Mutual and Pinnacle Insurance are all among those companies which have stockmarket-linked so-called precipice bonds maturing this month.

According to investment IFA Chartwell Investment Management, investors in SLI&#39s income & growth bonus bond 2 will only get back their original capital if the Eurostoxx 50 rises by 114 per cent by August 11.

The company warns that investors are willing to make misselling claims, even though there may be no foundation to them, because they are becoming increasingly aware that the Financial Ombudsman Service is free of charge to them.

Claims made to the Financial Ombudsman Service involving structured products sales have rocketed by 627 per cent in 2002/03 to 2,631 compared with 362 the previous year, it says.

RPC financial services team partner Jonathan Davies says: “With the increase in the number of headline-hitting mis-selling claims over the past year or so, we expect to see more investors who think they deserve compensation for lost capital taking this route, whether they actually have a reasonable claim or not.”

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