Business owners ‘too embarrassed’ to make swaps claim
There is a fear businesses affected by interest rate swaps mis selling are reluctant to come forward and pursue a claim as they are either too embarrassed or resent being labelled as ‘unsophisticated’.
Following a pilot review into interest rate swap selling the Financial Conduct Authority (FCA) found that 9 out of 10 cases failed to meet regulatory requirements, prompting it to order banks to review its sales practice and evaluate clients, defining them as either ‘sophisticated’ or ‘unsophisticated’.
"For these purposes we have defined ‘sophisticated customer’ as: in the financial year during which the sale was concluded, a customer who met at least two of the following: (i) a turnover of more than £6.5 million; or (ii) a balance sheet total of more than £3.26 million; or (iii) more than 50 employees. Alternatively, the firm is able to demonstrate that, at the time of the sale, the customer had the necessary experience and knowledge to understand the service to be provided and the type of product or transaction envisaged, including their complexity and the risks involved".
Clients deemed ‘sophisticated’ are not eligible for redress while ‘unsophisticated’ clients would have their case investigated further.
But despite the obvious benefits, in this instance, of being classed ‘unsophisticated’, Simon Cottrell, Senior Partner at Goldsmith Williams, is concerned this label is deterring clients from making a claim:
“It takes a certain kind of person to successfully start, maintain and grow their own business. They are dedicated, hard working and an expert in their particular field so it’s understandable why being regarded by fellow professionals as unsophisticated may be a bitter pill to swallow. As a business owner myself, it’s certainly isn’t something that would sit very well with me.
“However as a business owner I also know you have to do things that you may not particularly want or like for the good of your business and, given the amount of money involved in the average interest rate swaps case, making a claim is certainly in the best interest of your business.
“It was Juliet who asked ‘What’s in a name? that which we call a rose By any other name would smell as sweet’. See I’m quoting Shakespeare, clearly I’m sophisticated but, as a business owner and under the FCA definitions, I may not be branded as such.
“While I’m not disagreeing with Mr Shakespeare, in this instance a name is not the be all and end all so make the sensible choice - consult specialist legal representation and reclaim the true extent of a mis sold interest rate swap.”
Content correct at time of publication