SEOUL, Jan. 20 (Korea Bizwire) – A lower court ordered Deutsche Bank on Friday to compensate investors for damage it caused by manipulating stock prices, in the nation’s first-ever ruling on a class action suit.
The Seoul Central District Court ordered the Germany-based financial services company to pay a total of 8.55 billion won (US$7.28 million) to six plaintiffs who invested in local equity-linked securities (ELS) products in 2007.
An ELS is structured to link yields to the performance of underlying assets, such as individual stocks. The instrument does not guarantee principal but premises relatively high yields.
The plaintiffs invested in Korea Investment & Securities Co.’s ELS products based on shares of KB Kookmin Bank and Samsung Electronics in 2007. Deutsche Bank, which Korea Investment contracted with to hedge the products, lowered KB Kookmin’s stock prices by unloading its shares just before the market closed on the expiry day in August 2009.
The court said the plaintiffs received 74.9 percent of the principle, instead of 128.6 percent which they could have received if the defendant did not manipulate the stock prices, acknowledging the price difference as the damage they suffered.
The ruling marked the first case made under the Securities-Related Class Action Act since the law took effect in 2005. In South Korea, a class action suit can only be filed in securities-related cases.
If the ruling is confirmed by the country’s top court, it will impact all those who invested in the same products.
It is one of only three class action cases that the Supreme Court has so far approved to proceed. A trial involving the Royal Bank of Canada (RBC) is currently under way and the other case with a local construction equipment parts manufacturer ended in a settlement out of court.