Eddie Jordan, the former owner of a Formula One team, has started a legal battle against HSBC for many millions of pounds. The dispute is based on the bank’s alleged misselling of a sophisticated bond in which Jordan had invested.
Mr. Jordan, who became one of the most flamboyant and successful figures in Grand Prix motor racing during a period at the helm of his namesake Formula One team, has reportedly filed a lawsuit against the private banking arm of HSBC at the High Court in London. The reporter has obtained this information.
As a result of the losses he claims to have incurred as a result of his investment of £46.9 million in the HSBC GIF Global Credit Floating Rate Fixed Term Bond Fund in 2019, Mr. Jordan is actively pursuing compensation from the FTSE-100 lender in the amount of over £5 million.
He is also seeking that the bank pay him interest on money that was subject to margin calls and that he allegedly lost as a result of the investment’s declining performance. He is demanding this from the bank.
According to individuals who are aware of the matter, Pendragon Investment Holdings (PIH), which is Mr. Jordan’s investment vehicle, is requesting around £5.5 million from HSBC.
Some reporters have obtained a copy of a legal document that contains a claim made by PIH. The claim states that executives from HSBC falsely described the risk of the fund defaulting on multiple occasions, and they failed to take into consideration Mr. Jordan’s stated appetite for risk.
According to the document, the former financial chief of Formula One had been a client of the institution with headquarters in London since 2009.
Following a series of instances that were quite similar to this one in the aftermath of the global financial crisis that occurred in 2008, the legal battle will bring about a new level of scrutiny of the manner in which banks promote complex products to skilled investors.
Sir Keith Mills, another well-known businessman and the creator of Air Miles, fought Coutts, a private bank that is a member of the NatWest Group, in open court. This encounter was one example of several similar conflicts.
Not only does Mr. Jordan’s civil claim assert that HSBC misrepresented the likelihood that he stood to lose more than one percent of the funds he had invested, but it also asserts that the bond portfolio in which the fund invested included considerable exposure to assets that were not considered investment grade.
These consisted of, according to PIH in its filing, “significant exposure to the Chinese property sector, as well as the Russia, Turkey, and Zimbabwe markets, none of which could reasonably be described as low risk” .
PIH’s claim also said that the structure of the fund was “fundamentally flawed” due to the fact that it was not linked with Mr. Jordan’s investment objectives of income production and capital preservation. The fact that HSBC decided to include high-yield bonds in the fund’s portfolio further supported this.
HSBC may have utilized the formation of the fund “for its own business reasons” (including the need or desire for the defendant to dump an exposure to particular bonds from its own balance sheet), according to the legal filing, which also raised the potential of this happening.
In addition, it was not apparent how many other HSBC customers had invested in the fund that was at the center of the issue, nor was it obvious whether the bank might be the subject of any additional legal claims in connection with the disagreement.
According to a statement that was sent to the reporters by a representative of PIH, the following comment was made: “Pendragon is fully committed to its claim against HSBC and intends to see it through in order to recover its losses, which it considers to have arisen out of the actions of the bank, as detailed in its claim.”
HSBC’s response to Mr. Jordan’s legal action will come at a crucial time for the bank, despite the fact that it will not have a significant impact on the bank’s finances.
As of this month, it has appointed Georges Elhedery, who is currently in charge of finance, to the position of group chief executive.
Mr. Elhedery will take over for Noel Quinn, whom investors acknowledge as having done a good job managing a business that was subject to some of the world’s most dangerous geopolitical headwinds.
The London-listed shares of HSBC reached a closing price of 665.2p on Friday, giving the company a market capitalization of approximately 123 billion pounds.