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Sir Keith Mills launches legal action against Coutts

Sir Keith Mills has initiated legal action against Coutts & Co over advice that saw him invest £65m of his savings in AIG Life premier bonds.

Mills, the founder of the Air Miles and Nectar loyalty programmes, says the bank gave him “negligent” advice in December 2007 when it advised him to invest in the bonds which were backed by its enhanced fund.

In September last year AIG Life suspended withdrawals from, and then closed, the enhanced fund.

Mills says the bonds were recommended by Coutts as a low-risk, easy-access investment.

He says when he contacted Coutts in March 2008 to express concerns about the continuation of the investment he was told that Coutts was “still not concerned with any risk to investors such as yourself”.

Mills says: “Coutts said these bonds were an alternative to a traditional bank or building society deposit account but the reality was that this investment was far riskier.

“What is astonishing is that Coutts continued to push the AIG bonds as its share price was collapsing. It was still recommending AIG premier bonds right up until AIG closed the fund, trapping hundreds of millions of pounds’ worth of Coutts customers’ money. Over six months before AIG suspended the fund I wrote to Coutts because I was concerned about AIG, but Coutts wrote back to assure me that my money was safe.”

Barlow Lyde & Gilbert served Coutts with a “letter of claim” on Friday on behalf of Mills, which is the first step before issuing negligence proceedings.

The action follows a campaign by Mills to shame the bank into compensating customers who have lost out.

As part of his action, Mills says he will be seeking disclosure from RBS Group, Coutts’ parent company, of documents related to commissions paid by AIG to Coutts to sell its products.

He also wants to see details showing the extent to which Coutts/RBS actively monitored the financial strength of AIG investment products, and how far they were aware of the declining market value of the underlying assets in the fund.

Mills’ claim also alleges that he was not informed by Coutts that guarantees provided by the UK’s Financial Services Compensation Scheme only applied if AIG’s life insurance division went bust but not in the event of a winding up of one of its funds.

He is planning a further advertising campaign to bring his grievance to the attention of new Coutts chief executive Michael Morley. He has set up a website, www.couttsaigactiongroup.org, for other Coutts customers who were advised to buy AIG Life Premier bonds.

A Coutts spokeswoman says: “Our position has not changed, we remain confident that the AIG product was sold with the appropriate advice, and was compliant with FSA regulations. It was sold as a low risk, not no risk product and that the value of the investment can go down as well as up.

“Our clients in the recovery fund do not stand to lose any money. The value of the remaining assets in the fund are continuing to grow and are expected to return their full value by July 2012. Additionally, AIG has set aside assets to provide a guarantee to cover any shortfalls in the fund at July 2012. For those clients who require liquidity, Coutts has made available a loan to the full value of their investment.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 22nd June 2009 at 3:22 pm

    Sir Keith Mills launches legal action against Coutts
    And he didn’t even know what the remuneration arrangements were!! On an investment of £65m!! Does Coutts even have a compliance department to monitor the activities of whichever part of it markets and sells packaged financial products? Stupid question ~ it’s a bank!

  2. AIG Investments
    These wealthy clients should have the sense to stop dealing with the banks and get themselves an IFA. How many IFAs would stick £65m into one fund?….er?…..none.
    I’ve lost count of how many times, as an IFA, I’ve picked up a former bank client and they have everything in one (usually totally unsuitable) investment. With the banks it seems to be all about shifting volumes of product and then crossing their fingers in the hope nothing goes wrong,
    Regardless of how wealthy you are, you should get yourself an IFA and, the more money you are investing, the more important it becomes to get independent financial advice and to stay away from the banks.

  3. Happy to help this man
    More than willing to take on his bank and the provider, regulator too if he has the stomach for a claim of misfeasance.

  4. Oh dear!!
    64 million into a structured product. My god what a mug! An investment of this size, he should have negotiated a full commission rebate or re-investment and done the same with the renewal fee. Personally I would never invest in anything if I did not know or understand the risk of the underlying assets

  5. Appropriate advice !!!!!
    The Coutts spokeswoman was ‘confident that the AIG product was sold with the appropriate advice and was compliant with FSA regulations’!!!

    The gentleman didn’t even know what the product was so how could ‘appropriate’ advice have been given? Stating that this deal was ‘FSA compliant’ is stupid and just shows that the Bank was/is not interested as long as it can ‘tick the right boxes’. In any event it is utter rubbish to think that FSA ‘rules’ are sufficient for a £65m investment. Just shows the stupidity of ‘Best Practice’ as opposed to ‘Best Advice’. When I was audited some while back I was told that if I adhered to the former then I would then I would comply with the latter. Just shows you can drive a coach and horses the former, a fact that I pointed out to the regulators auditor at the time.
    Also which employee hit his annual target for selling AIG funds in one ‘hit’ with this? And how much was his bonus?

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