Towry Law May Face Additional Compensation Claims

by Carla Johnson, Investors Offshore.com

02 September 2004

Bloomberg has reported that Towry Law Group may face liabilities of up to $250 million for misrepresenting and promoting risky investments offered through its international division, in addition to the $30 million it offered last month to compensate investors harmed by the collapse of Global Opportunities Trading (GOT) and Global Diversified Trading (GDT) hedge funds.

Towry was not responsible for the Hong Kong-based funds or their collapse, but the SAR's Securities and Futures Commission alleged that its due diligence into the GOT and GDT funds had been insufficient, and that it had mis-sold risky investments to clients looking to limit their exposure to risk.

Although the settlement offer prompted the SFC to end its investigation into the matter of the hedge funds, SFC regulators told Bloomberg that they are investigating other products sold by Towry Law. "They are very much on our radar screen," said Alan Linning, the Hong Kong Securities & Futures Commission's executive director of enforcement, in an interview.

According to Bloomberg, court documents show that Towry Law placed $450 million of client funds in leveraged products in Asia and the Middle East between 1998 and 2003.

UK firm Class Law Solicitors LLP says it has been instructed by a group of TLI victims based in Cyprus and led by Denis O’Hare, to consider claims on behalf of investors in several funds sold by TLI outside the UK, on the basis that they were not advised of the risks involved in these investments and (in certain cases) of the nature of the associated loans. Class Law has held meetings in Hong Kong, Dubai and Bahrein to seek further parties to join a class action against TLI.

TLI belongs to UK-listed group HHG plc, along with Henderson, Pearl, London Life and other financial services companies. Vicki Staveacre, HHG's director of corporate affairs in London, says that HHG has made provision for potential losses. She declined to tell Bloomberg how much.

John Simmonds, Towry Law's managing director, said he did not believe total compensation for mis-selling of products by Towry Law's international arm would reach $250 million. "That's very, very wide of the mark," he said.

Towry Law International closed to new business with effect from 9 July 2004. Its UK division however continues to operate within HHG plc.

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