Rautaruukki Personnel Fund to sue asset manager Bank of Åland

Personnel fund requests EUR 461,000 in damages, Bank of Åland offers EUR 32,000

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The personnel fund of Rautaruukki, a Finnish manufacturer and supplier of metal-based components and systems for construction and engineering, and Ålandsbanken - the Bank of Åland - have ended up in a legal battle over a disagreement concerning investment losses.
      The dispute was caused by an investment of EUR 1.8 million by the Bank of Åland’s asset management arm in the American stock market, against the wishes of the personnel fund.
      The personnel fund, owned by around 7,000 Rautaruukki workers, is a fund through which the company shares its profits with its workers. Presumably this is the first time in Finland that a personnel fund is bringing a legal action against its asset managers.
     
The personnel fund, which is the sixth largest in Finland when measured by membership, is asking for nearly half a million euros in compensation, because the investment was made against the fund’s specific instructions “not to invest in the American financial market”.
      Despite the instructions, Ålandsbanken bought shares worth EUR 1.8 million in an open-ended mutual fund called Martin Currie Gf - North American Fund, which invests in the United States in particular.
     
The asset management contract was terminated for unrelated reasons on September 16th, 2008, and the personnel fund assumed the overseeing of its portfolio.
      In less than a month after the termination of the contract the personnel fund found out about the American investment through a portfolio report, according to which 26 per cent - or EUR 461,735 - of the total amount of EUR 1.8 million had vanished.
      The personnel fund demands that the investment loss be compensated with interest up to the point when the fund became aware of what had happened.
     
Ålandsbanken’s reply focuses on dates. The personnel fund’s instructions not to invest in the American market were received on June 19th.
      The bank admits that the request was not entered into the bank’s systems.
      Therefore, an investment in the US stock market was made on September 9th.
      A week later the bankruptcy announcement by the investment bank Lehman Brothers marked the start of the economic downturn.
      The investment in the Martin Currie fund was still on the plus side the next day, when the Rautaruukki people terminated their contract with Ålandsbanken.
     
During the contract’s five-day period of notice the Currie investment plummeted along with the general decline of stock prices.
      In the course of those five days a loss of EUR 32,940 incurred. The bank has offered to replace this loss.
      In Ålandbanken’s view the bank is not responsible for the losses that transpired after that, because it was no longer attending to the portfolio.
      The continuing negotiations between parties on the matter have so far proved fruitless.
      Hence the handling of the case by the Helsinki District Court looks set to start by the end of the year.


Links:
  Rautaruukki
  Bank of Åland
  Martin Currie – Sicav Funds

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