Vista de los juzgados de Bilbao en los que se ha llevado el caso.

Source: Diario Sur

The sale was conducted through commission-driven financial advisors based in Estepona, Marbella and Fuengirola.

Court of First Instance 11 in Bilbao has ruled that twelve mortgage loans valued at 6 million Euros, granted to British families mostly in the Malaga province between 2004 and 2007, should be declared void.

The Court dealt with this case as all loans were granted at a Bilbao Notary Public and the representatives of the lender, SL Mortgage Funding nº1 Limited (SLMF), were also based in the Basque city, according to Lawbird Legal Services S.L.P.

These loans were sold to attain a reduction in potential inheritance tax, inasmuch as the mortgage would reduce the taxable value of the property, but also as a means to supplement the modest pensions received by the owners of the properties.

Chester-based SL Mortgage Funding nº1 Limited (SLMF) had not applied for the necessary regulatory permits to legally raise funds from the public and provide an investment service, activities reserved and regulated by the Bank of Spain and the CNMV (financial regulator).

In spite of not having any of the above authorizations, SLMF would lend but at the same time retain most of the proceeds of the loan, which would then be invested by them.

The ruling declares that “infringing the protocols set by the relevant administrative authority to supervise the disputed product is a regulatory violation that exceeds that of a mere breach of banking laws, such as misselling, so profusely dealt with recently in relation to the massive sale of complex financial products.”

The Judge held that in this case, the breach of public policy “is far more serious for it makes a mockery of a whole system of financial and banking supervision designed to prevent abuses to consumers and protect the stability of the sector”, and likens this behaviour “civil fraud”, which is any proposal that contravenes mandatory regulations or has a false or forbidden reason.

The sale of this product was conducted via commission-earning financial advisory firms (Hamiltons Financial Services, Henry Woods Investment Management and others), based in Estepona, Marbella and Fuengirola.

SLMF also recommended a network of lawyers that created an appearance of seriousness, downplaying the extent of the lack of licensing requirements of the bank and the product.

According to Lawbird Legal Services S.L.P., for the claimants, the ruling confirms that operating in breach of mandatory banking and financial regulations makes the suspect a “boiler room”, -even if the company was legally operating in their own country- and allows the victims to rid themselves of a nightmare lasting for over 10 years.

The Judge concludes that the nullity and voidness should be made applicable to all contracts and agreements executed between the clients and the bank, applying the laws of contractual termination in odd fashion –albeit most favourable- as clients “will be able to claim what consideration they gave under the contract without having to return was given to them.”

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