Eddie Jordan, the former Formula One team-owner, has launched a multimillion pound legal fight against HSBC over its alleged mis-selling of a complex bond in which he invested.
Sky News has learnt that Mr Jordan, who became one of Grand Prix motor racing’s most flamboyant and successful figures during a stint at the helm of his eponymous F1 team, has filed a claim against HSBC’s private banking arm at the High Court in London.
Mr Jordan is seeking almost £5m in compensation from the FTSE-100 lender over losses he claims to have suffered when he invested £46.9m into the HSBC GIF Global Credit Floating Rate Fixed Term Bond Fund in 2019.
He is also demanding the bank pays him interest on money that was subject to margin calls which he allegedly forfeited as a result of the investment’s deteriorating performance.
In total, Mr Jordan’s investment vehicle, Pendragon Investment Holdings (PIH), is seeking about £5.5m from HSBC, according to people familiar with the case.
A legal filing seen by Sky News includes a claim by PIH that HSBC executives repeatedly misrepresented the risk of the fund defaulting, and failed to take account of Mr Jordan’s stated appetite for risk.
The former F1 executive had been a client of the London-headquartered lender since 2009, according to the document.
The legal fight will throw fresh scrutiny on the way banks market complex products to sophisticated investors following a string of similar cases in the aftermath of the 2008 global financial crisis.
One such confrontation saw another prominent businessman, the Air Miles founder Sir Keith Mills, fight a public legal battle with Coutts – the private bank owned by NatWest Group.
AdvertisementMr Jordan’s legal claim alleges that HSBC not only misrepresented the likelihood that he stood to lose more than 1% of the capital he had invested, but also that the bond portfolio in which the fund invested included significant exposure to non-investment grade assets.
These included, PIH said 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”.
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Tap hereHSBC’s selection of high-yield bonds for the fund’s portfolio meant, PIH’s claim added, that its construction was “fundamentally flawed” because it was not aligned with Mr Jordan’s investment objectives of income generation and capital preservation.
The legal document also raised the possibility that HSBC used the construction of the fund “for its own business reasons (including the need or desire for the Defendant to offload an exposure to certain bonds from its own balance sheet)”.
It was unclear how many other HSBC clients had invested in the fund at the centre of the dispute, or whether the bank might be the subject of any other legal claims in relation to it.
In a statement issued to Sky News, a spokesman for PIH said: “Pendragon is fully committed to its claim against HSBC and intends to see it through in order to recover its losses which it considers have arisen out of the actions of the bank, as detailed in its claim.”
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While not financially material to HSBC, its response to Mr Jordan’s legal claim will come at an important time for the bank.
This month, it named Georges Elhedery, its finance chief, as its next group chief executive.
Mr Elhedery will replace Noel Quinn, who is regarded by investors as having done an effective and competent job running a company caught in some of the world’s most fraught geopolitical headwinds.
On Friday, HSBC’s London-listed shares closed at 665.2p, giving it a market capitalisation of nearly £123bn.
HSBC declined to comment.