The Court of Appeal of Florence, by reforming the first-instance ruling, has fully supported the savers who held MPS subordinated bonds, which were then converted into shares to save the bank
The story
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The ruling no. 1423/2024 of 6 August 2024 of the Court of Appeal of Florencereforming the ruling of the Pisa Court of 2021, has fully given reason to the savers who own MPS subordinated bondsThen converted into shares to save the bank.
In 2018, savers had turned to the Court of Pisa, which, with a 2021 ruling, had ruled in favor of Banca Monte dei Paschi.
Instead, after having challenged the sentence, the Court of Appeal of Florence, in reform of the Pisa sentence, recognized the customers’ right to be compensated for losses why the bank consultants they had never informed of the subordinate rank of MPS bonds.
The Court reconstructed the common story of many holders of subordinated bonds of Banca Monte dei Paschi di Siena who saw their investments expire because they were converted into ordinary shares as a result of Burden Sharing. The ruling is important because establishes the criteria to be followed in determining the loss and therefore of the compensation that savers are entitled to.
In fact, many customers, undecided about what to do, had kept the shares in their portfolios, thus amplifying the losses.
The MPS Subordinated Bonds Case
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Like many savers, the clients had purchased bonds with orders executed in 2011. The bank had presented the securities as ordinary bonds when in reality they were subordinated bonds.
Following the crisis at Banca Monte dei Paschi di Siena, the mechanism of the cd. burden sharing provided for by Community legislation, which imposed only on holders of subordinated bonds the conversion of such securities into shares, with rapidly declining prices.
Serious default by the bank
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The Court of Appeal found, among other issues, that the intermediary failed to provide evidence of having provided specific information about the subordinate nature of the obligations.
Furthermore, the Court specified that the subordinate nature of the shares was an element of undoubted importance that affected the nature of the financial instrument and its characteristics and therefore had to be made known and explicit within the obligation of complete and specific information that weighed on the intermediary. Nonetheless, the Court reiterated that in this case any “profiling” of the customers was absent; it is specifically noted that the transaction is not adequate in relation to the “investment discrepancy with declared experience“. These elements lead us to believe that there is a serious breach by the intermediary with respect to the information obligations prescribed by the TUB and the Consob regulation on intermediaries.
The most interesting aspect of the decision of the Court of Appeal of Florence is the quantification of the damage, which the Florentine Court determined with the criterion most favorable to the saver, that is, in an amount equal to the difference between the value of the securities at the time of purchase (net of the coupons collected in application of the general criterion of “compensatio lucri cum damno”) and the counter value determined at the current prices at the time of the sentence, in the specific case (See Cass. Cass. Ordinance n. 17948/2020) and not, instead, the prices resulting on the conversion date. With this criterion, customers received full compensation for the shares that remained in their possession for the entire duration of the process, losing over 99% of their value. The official price is Euro 4.39 per share, but it should be taken into account that the extraordinary shareholders’ meeting of 15 September 2022 resolved to group the ordinary shares of Banca Monte dei Paschi di Siena SpA in the ratio of 1 new ordinary share for every 100 existing ordinary shares.
Attorney Francesco Giordano
Lexopera Law Firm
Florence – Milan
www.lexopera.it
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