Royal Bank of Canada sued over investment losses

SEOUL, Jan. 7 (Yonhap) -- South Korean investors have filed a lawsuit against the
Royal Bank of Canada (RBC), demanding 3.2 billion won (US$2.8 million) in
compensation for losses incurred from the lender's equity derivative product, a
law firm said Thursday.
Hannuri Law Offices said it filed the class action lawsuit with the Seoul Central
District Court on behalf of two investors who lost 25.4 percent of their
investment in an equity-linked securities product issued and managed by the
Canadian lender.
The complaint was based on the allegation that RBS' stock sell-off led to massive
losses on the investment product that would have otherwise earned profits.
The product "Smart ELS 10" was issued on April 2008 with a one-year maturity and
sold by local brokerage Hanwha Securities Co. to 438 local investors. The
product, worth 6.8 billion won and linked with POSCO and SK Holdings Co. stocks,
was structured to yield a 22 percent return if, upon maturity, the shares closed
higher than 75 percent of their price on the day the product was issued. Prices
lower than that would lead to investment losses.
The Financial Supervisory Service found the Canadian bank guilty after
investigating allegations that the lender's massive selling of SK shares on the
maturity date affected the stock price. The financial regulator reported its
findings to an investigative body last year.
The case is the first class action suit brought against a foreign financial
institution. Winning the suit automatically grants other investors the same right
to compensation as the two plaintiffs.
pbr@yna.co.kr
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