Up to 900 AIB customers who invested in two property funds have been unfairly locked out of a compensation scheme, according to consumer advocate Padraic Kissane.
AIB marketed funds called Belfry Investments to its customers between 2002 and 2006 through the bank itself, its Goodbody stockbroker arm and its private banking unit working with high net worth individuals. Investors had to invest a minimum of €80,000 for an individual or €100,000 for joint applicants, Mr Kissane said.
These were high-risk geared investment funds where up to 80 per cent of the money used to invest in property was borrowed by the fund alongside the cash put up by investors.
While the initial fund made money, Belfry 2-6 did not and failed in the wake of the 2008 financial crash, triggering a legal drama between a group of 300 investors and AIB that involved one Supreme Court appeal and lasted until a settlement in 2021.
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Investors claimed they had not been made aware of the risk profile of the investment or that it was geared. Covenants attaching to the funds triggered repayment of the fund borrowings when the value of the fund dropped before the amount they had lent to the fund, rendering the investments worthless to AIB customers who had invested.
Mr Kissane says AIB has refused to entertain claims for refunds and compensation from investors in the Belfry 5 and 6 funds, claiming that amendments to the prospectus for those funds made clear to individuals that the funds were high risk.
However, a spokesman for the bank said some investors in those two funds had been refunded some or all of their money following investigation of their individual cases.
Mr Kissane says he has been dealing with close to 100 Belfry customers since late last year and is not happy with the bank’s position.
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The financial adviser, who rose to public prominence when he successfully challenged Irish lenders’ refusal to accept responsibility for the tracker mortgage scandal, said he was particularly concerned with the cases of people who had either borrowed funds to invest or who had invested through their pension funds.
He also says that targeting people who had money on deposit with the bank for investment, a group he claims is generally regarded as having a low-risk appetite, raised major questions for the bank.
In most of the cases he has reviewed so far, Mr Kissane says the paperwork has been “sloppy” and the investors claim that, far from being informed that the investments were “high risk”, they had been presented as a “sure thing”.
Since the 2021 settlement, AIB says it has conducted a case-by-case review to determine if a refund may be due to investors. It also offered investors access to an independent appeal process with a deadline of last November. The bank says 99.8 per cent of appellants have now been notified of their outcomes.
AIB has made provision for Belfry settlements of €239 million to date. It is understood that payments to date fall short of that figure.
Mr Kissane called on all Belfry fund customers, “especially those customers who invested in Belfry 5 and 6 and indeed all those who have not been fully refunded their initial investments to date”, to get in touch with his office.
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