Natixis fined €7.5m for ‘misleading’ investors on subprime exposure
French investment bank Natixis has been fined €7.5m after a court found that it misled investors over its exposure to subprime mortgage assets, handing victory to a group of small shareholders.
The penalty is the first imposed by a French criminal court on a bank related to its communication around the risky assets that were at the heart of the global financial crisis of 2008, according to lawyers in the case.
The case, which started with a complaint brought in 2009 by the Association for the Defense of Minority Shareholders (Adam), representing around 750 Natixis shareholders, centred on a press release the bank sent out in November 2007.
The release outlined exposure of €356m to a portfolio of collateralised debt obligations and added that the “risks borne by Natixis in subprime [assets] are limited”. In its complaint, the shareholder association alleged that the actual exposure amounted to €1.59bn.
In its ruling, the Paris Criminal Court found that Natixis had “knowingly disseminated misleading information” in the press release.
Natixis proved one of the biggest French casualties when bonds backed by US subprime mortgages collapsed in value, forcing governments to bail out some of the world’s largest banks and triggering a global recession.
Shares in Natixis plunged to less than €1 in March 2009, down from €19.55 when the bank went public in December 2006.
Alongside the fine, the shareholders who had brought the case were awarded a lump sum depending on the amount of stock they owned between November 2007 to February 2008. The award equated to about €3 for every share owned.
Eric Dezeuze, a lawyer representing Natixis, said the sum awarded to the plaintiffs would likely cost Natixis around €2m.
Natixis said in a statement that it “considers that it did not commit any offence” and “has decided to lodge an appeal against this decision as the Paris Criminal Court did not take into account the arguments presented at the hearing”.
The court defeat comes after a bruising 12 months for Natixis, which in January agreed to sell its majority stake in H2O after the asset manager’s decision to put €1bn of investors’ money into illiquid bonds linked to Lars Windhorst, a controversial German financier, alarmed investors.
In February, French co-operative bank BPCE made a formal offer to take full control of Natixis, in which it already owns a majority stake.