A shareholder group has begun legal proceedings against Royal Bank of Scotland Group and four former directors for up to four billion pounds in compensation.
The RBOS Shareholder Action Group has launched a class action lawsuit demanding compensation for losses resulting from the bank's £12bn rights issue in 2008 when it is now claimed the "directors sought to mislead shareholders by misrepresenting the underlying strength of the bank and omitting critical information from the prospectus'.
The shareholder group makes the claims against former Chief Executive Fred Goodwin, Chairman Tom McKillop, as well as directors Johnny Cameron and Guy Whittaker as well as the bank itself.
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The group, which represents around a hundred financial institutions and thousands of small shareholders, claims the true purpose of the rights issue was not disclosed at the time and that the directors in charge misrepresented the underlying strength of the bank and omitted critical information to give the impression the bank remained financially secure.
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A statement from the group notes that, under the Financial Services and Markets Act, "RBS is liable to pay compensation to each of the claimants for its losses, amounting to the difference between the price paid for the new shares and their actual value".
A spokesman added that "today represents a giant step forward for the many thousands of ordinary people who lost money as the result of inexcusable actions taken by banks and their directors in the financial crisis. Now, for the first time, some of these directors will have to answer for their actions in a British court".
The action group represents over 12,000 private shareholders, many of whom are pensioners, and over 100 institutional investors such a number of ING funds, the trustees of the Mineworkers' Pension Scheme and the Electricity Pensions Trustees.
This lawsuit, issues by lawyers at Bird & Bird, comes on the heels of another class action issued last month on behalf of 21 other institutional investors.
