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March 3, 2008

Shareholders of Northern Rock to challenge government

by Richard Kilner

Story link: Shareholders of Northern Rock to challenge government

Hedge funds SRM Global and RAB Capital, the two largest former shareholders of nationalised bank Northern Rock, are expected to launch a legal action against the government this week.

A small shareholders’ group is hoping to ride piggyback on the action, should it be launched.

The Northern Rock Small Shareholders’ Group represents 100,000 investors, each with under 1,000 shares. The Group has confirmed it has taken legal advice for the eventuality that the shares are rendered worthless.

The action would be targeted at the Financial Services Authority, the Treasury and the Bank of England, for their part in the collapse and nationalisation of Northern Rock.

SRM’s head, John Wood, has confirmed that the action is probably to be filed sometime this week.

Wood has also said that individuals such as Chancellor Alistair Darling and Governor Mervyn King will be called as witnesses, but that it has yet to be decided whether they will be named in the case.

Because the Small Shareholders’ Group lacks the funding available to SRM and RAB, they have asked the two hedge funds if they could join their action, to add weight to their case.

Northern Rock shares were suspended at 90p, and independent experts believe that shareholders do have a case to challenge the government.

In addition, shareholders could sue under European law for expropriation of property.

 

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