Former Formula One team-owner Eddie Jordan has initiated a multimillion pound legal battle against HSBC over allegations of mis-selling a complex bond that he had invested in. According to sources, Mr. Jordan, renowned for his flamboyant persona and successful tenure as the head of his eponymous F1 team, has filed a claim against HSBC’s private banking arm at the High Court in London.
In his claim, Mr. Jordan is seeking compensation of nearly £5 million from the FTSE-100 lender for losses he claims to have incurred when he invested £46.9 million into the HSBC GIF Global Credit Floating Rate Fixed Term Bond Fund in 2019. He is also demanding interest on the money that was subject to margin calls, which he allegedly forfeited due to the fund’s declining performance. The total amount being sought by Mr. Jordan’s investment vehicle, Pendragon Investment Holdings (PIH), is approximately £5.5 million.
According to a legal filing seen by Sky News, PIH has accused HSBC executives of repeatedly misrepresenting the risk associated with the fund defaulting and failing to consider Mr. Jordan’s risk appetite. The document also reveals that Mr. Jordan had been a client of HSBC since 2009.
This legal battle will shed light on the marketing practices of banks when it comes to complex products aimed at sophisticated investors, a topic that has faced scrutiny following several similar cases in the aftermath of the 2008 global financial crisis. Notably, Air Miles founder Sir Keith Mills had a public legal dispute with Coutts, the private bank owned by NatWest Group.
PIH’s claim states that HSBC not only misrepresented the likelihood of losing more than 1% of the invested capital, but also that the bond portfolio of the fund included a significant exposure to non-investment grade assets. These assets, including the Chinese property sector, Russia, Turkey, and Zimbabwe markets, were not low risk as claimed by HSBC.
Furthermore, PIH’s claim argues that HSBC’s selection of high-yield bonds for the fund’s portfolio was “fundamentally flawed” as it did not align with Mr. Jordan’s investment objectives of income generation and capital preservation. The legal document also raises the possibility that HSBC structured the fund for its own business reasons, including offloading certain bonds from its balance sheet.
It is unclear how many other HSBC clients had invested in the fund in question, or if the bank may face additional legal claims related to it. A spokesperson for PIH stated that the company is fully committed to its claim against HSBC and intends to recover its losses resulting from the bank’s actions.
Although not financially significant for HSBC, the bank’s response to Mr. Jordan’s claim comes at a crucial time as it recently announced Georges Elhedery as its next group chief executive. The bank’s current chief executive, Noel Quinn, is highly regarded by investors for competently managing the company amidst challenging geopolitical conditions. HSBC’s London-listed shares closed at 665.2p on Friday, with a market capitalisation of nearly £123 billion. HSBC declined to comment on the matter.
