BrisConnections, a cautionary tale

Generali

Degenerate wrote: »

The position of a stockbroker is similar to that of a conveyancer for property transactions. You would rightfully expect them to understand the legal implications of any covenants in the deeds etc, which could lead to expensive future liabilities, and to warn you appropriately.

The risk you knowingly take with shares is based on your confidence in the company you are buying into. Just like if you bought a knackered old house, obviously the conveyancer would not be liable for that.

The rise of execution-only stockbrokers has muddied these waters, by using one you are deciding that you don't want your hand held, but I still don't see how they can escape liability if the information was not provided at all.

Ok, sure. If you pay conveyancing-type prices to your stock-broker you can expect conveyancing-type advice.

People don't though. They pay a few tens of quid and then want thousands of pounds worth of advice.

JayScottGreenspan

The shareholders should get together and set up a limited liability company (or just find a friendly person with no assets) to buy ALL of their shares for 1/1,000,000th of a cent.

Then that company/person should give them the finger.

lemonjelly

Generali wrote: »

Why? If you're investing in shares then you're taking a risk aren't you?

Yes you are - hence caveat emptor. You should never buy anything until you have made sure that the product is right for you.

The second part of my post was more in relation to your comments about purchasers with limited english. When you engage a third party to do anything on your behalf, do they not have some form of duty of care towards their client?

StevieJ

Generali wrote: »

So what do you think? Should the investors lose everything? Should they have been specifically warned before they bought? Should small investors have been banned from buying? This isn't an uncommon way to structure a share issue BTW, many of the British privatisations were done in this manner - BT for example.

Make sure you understand what you're buying before you buy it!

I remember the BT deal and I am pretty sure investors were well warned about that, it wouldn't have stopped some using it to gear up I wager, if it had not been well over subscribed.

Generali

lemonjelly wrote: »

Yes you are - hence caveat emptor. You should never buy anything until you have made sure that the product is right for you.

The second part of my post was more in relation to your comments about purchasers with limited english. When you engage a third party to do anything on your behalf, do they not have some form of duty of care towards their client?

I see, I misunderstood.

It depends the basis on which I engage someone as to whether they have a duty of care. If I get an execution-only broker to whom I paying a tenner or twenty quid they owe me nothing. If I go to someone and engage them on the basis that they will advise me and charge accordingly then they do have a duty towards me.

These days, most people seem to go for the latter type of broking which is their choice. They can't expect execution-only prices and advice-based service though!

kennyboy66_2

This is a really interesting story.

I think its impossible to protect people from themselves in these circumstances and probably undesirable as well.

I saw that Macquarie as the underwriters will bail out small investors (50k shares or less), although this does not help everyone.

Maquarie were paid $100 million dollar to advise & structure the deal.

If people think that the "golden circle" or investment bank, lawyers & accounrtants are expensive in London, I can imagine the fees are just as juicy down under.

kennyboy66_2

JayScottGreenspan wrote: »

The shareholders should get together and set up a limited liability company (or just find a friendly person with no assets) to buy ALL of their shares for 1/1,000,000th of a cent.

Then that company/person should give them the finger.

There was a resolution to wind the company up. It failed by 65-35% - but only when a 27 year old investor sold his 19.5% parcel of shares to one of the contractors building the road.

The moral is big shareholders & company boards are not remotely interested in small shareholders - in fact they see them as a nuisance.

lemonjelly

Generali wrote: »

I see, I misunderstood.

It depends the basis on which I engage someone as to whether they have a duty of care. If I get an execution-only broker to whom I paying a tenner or twenty quid they owe me nothing. If I go to someone and engage them on the basis that they will advise me and charge accordingly then they do have a duty towards me.

These days, most people seem to go for the latter type of broking which is their choice. They can't expect execution-only prices and advice-based service though!

Agree with you 100%

It concerns me how many people go ahead and buy all sorts of goods or services without checking if they are suitable for them Costs & consequences need to be known before going ahead.

JayScottGreenspan

kennyboy66 wrote: »

There was a resolution to wind the company up. It failed by 65-35% - but only when a 27 year old investor sold his 19.5% parcel of shares to one of the contractors building the road.

Cripes, that is dodgy.

Generali

JayScottGreenspan wrote: »

Cripes, that is dodgy.

Is there some reasn they can't do what I described, though? Why all go bankrupt when you can just organise for a friendly homeless chap to go bankrupt in exchange for a few tins every now and them?

Some investors have managed to register the stock in a dodgy name. My guess is that for a lot of people, they are only starting to realise the trouble they're in.