BANK ORDERED TO REPAY €90,000 TO COUPLE:A couple invested €150,000 in a UK property fund.

After three years they found the investment was worth less than €40,000. They alleged that the investment was inherently unsuitable because they had specified a low-medium risk.

The ombudsman found that in and of itself the investment was not unsuitable. However, the reason for the disastrous fall in its value was that the money was invested in a geared property fund whereby bank borrowings accounted for 75 per cent of the fund, with investors’ equity accounting for the balance of 25 per cent.

The effect of this gearing was that, if the value of the property increased, it would be advantageous for the investor, but if it decreased it would have a disproportionate effect on the value of the investors’ funds, as had happened.

The complainants argued that they should have been informed of the gearing. The case was brought to an oral hearing and the ombudsman ruled that the implications of gearing had not been explained to the complainants. He said the onus was on the bank to explain every nuance of an investment policy to customers, although the complainants had to take some responsibility for not reading the brochure in detail.

The ombudsman directed the bank to pay €90,000 to the complainants.