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29 ISTC investors filed complaints with ombudsman (Irish Times)

04 November 2011

Almost 30 investors with the collapsed International Securities Trading Corporation (ISTC) have filed complaints with the Financial Services Ombudsman and 13 have reached settlements, it has emerged.

Ombudsman Joe Meade said yesterday 29 investors with a total investment of over €5.2 million had made complaints to his office; of these, those who had settled had originally invested more than €1.5 million in the failed company.

ISTC, which earned profits by borrowing money in the inter-national markets and lending it on to banks, collapsed earlier this year forcing investors and banks to write off €820 million. It was the largest cash loss in Irish corporate history and the largest Irish casualty of the current global financial crisis.

The ombudsman expressed concern about the bonds sold by ISTC, which were lump-sum investments maturing after either five or seven years, with no earlier encashment allowed. Their value fell to nothing when the company went bankrupt.

Expressing concern about the profile of the customers involved, he said these products were unsuitable for their age. One complaint came from a person in his 90s, one person was in his 80s, six people were over 70 years, 10 were over 60 years and four were over 50 years. Just one person was under 50.

He said the complaints related to products sold by both brokers and stockbrokers. Mr Meade was unable to deal with one complaint because the product was sold by an unregulated agent. At least one complainant alleges his stockbroker invested his funds in ISTC bonds without his knowledge.

Three credit unions have also made complaints to the ombudsman about their investments in the company; one lost €1 million, another €200,000, while the loss incurred by the third credit union has not yet been disclosed.

Mr Meade also expressed concern about the fact that some bonds were sold with an insurance company “wrap around”, and questioned whether purchasers fully understood that the bond was an ISTC product and not an insurance bond.

He said his office was liaising with the Financial Regulator about the issues raised.