West Bromwich Building Society is set to be confronted by its investors, who claim the society is still ignoring them a year after devaluing their shares in a bid to keep the organisation going.
A week ago, West Bromwich said it was starting to turn the corner, with losses receding after a year that saw it come close to collapse.
To save the company, it eventually took the controversial step of devaluing the return on its permanent interest bearing shares (PIBS) by issuing a new type of share called profit participating deferred shares (PPDSs).
But a group of small-time investors say the company mistreated them and cut the value of their investments without consultation – and they are planning to confront the management at the society’s AGM in July.
Peter Morgan, an accountant from Cheshire who put about £10,000 of his savings into buying PIBS as an investment, has put together a group of about 50 disgruntled WBBS investors.
He says they had not been consulted about the changes to investments that had previously been described as permanent.
He said the company had still not fully explained the decision to him or other small-scale investors in the year since the rescue plan.
“Obviously we will be bringing it up at the AGM,” he said. “We were hoping that it would be resolved by then, but there will be a number of us who are keen to say something.
“But I’m not optimistic for a result because they have this legal right apparently to do what they have done, although they have refused to release the advice. The main thing that we would have liked to have seen is for the deal to be amended so that it wasn’t so draconian.
“But the society has decided that it had the legal right to do this irrespective of any moral position.
“I don’t understand the mentality of the board.
“It’s not a huge sum and if they had foregone the interest for a couple of years to tide them over I think that wouldn’t have caused such a problem. ‘I think people would have accepted it. But what they have done, and the way they have done it, is just unacceptable, unpleasant and unnecessary.”
About £75 million worth of PIBS had originally been sold as an investment guaranteeing a fixed permanent return of more than six per cent.
But the decision to issue the PPDSs meant the original investment lost both the rate of return and their saleable values.
The society had to take action after racking up losses of nearly £40 million last year from disastrous investments in the stock market. He said the society had denied reports it was in financial trouble just a month before announcing the rescue plan.
And he said investors were trying to get action from the FSA to recover the money they had lost, either through a reorganisation of the company’s share arrangement, or through a compensation payment.
He said: “They want to sweep it under the carpet and move on but I think private investors have just been trampled on.
“The worrying thing is that the FSA has allowed this to happen.”
West Bromwich has defended the action it took last year, saying it had been necessary to retain any value at all for shareholders.
A spokeswoman said the society had no further comment to make.