Toxic Assets, What Toxic Assets? London Readies For Suits
By: Ainsley Brown
Remember those ‘toxic assets’ – those famous, I guess now infamous, complex financial products – that went south during the global financial crisis? Well, the investors that bought and lost money certainly do.
And now here come suits.
The long and short of this is: timing. The once prized but now maligned synthetic collateralized debt obligations – what a mouthful – sold by investment banks to investors before the financial crisis, largely between 2005-2007, are now coming close to having to be accounted for. As the typical maturity date of these kinds of financial products is seven years investors will have no choice but to show the loses on their books – very soon.
And now here come suits.
The investor lawsuits, I believe, will largely center around investors claiming that these financial products where much more risky than represented by the investment banks that sold them. However, whether legitimate in substance or not these claims have a very large problem and that is the English Limitation Act. The Limitation Act places a six year time limit on brining such claims. Investors therefore can ill afford to wait much longer for fear of losing the very right to bring those claims.
To further compound the issue the English courts have yet to clarify whether the six year limitation period begins from the sale of the products or from the date the products’ value collapsed.
