Convertible bonds

In 2007, the Spanish bank Santander issued convertible bonds worth €7 billion to finance the purchase of Dutch bank ABN-AMRO. But the price of each share had actually been predetermined in 2007 through a complex formula meaning that consumers would pay €16 per share, instead of the actual market value of €6 per share. This meant that consumers would lose over 50% of the value of their investment.

 

The Spanish securities regulator CNMV sanctioned Banco Santander twice for the inappropriate selling of these products. Different regional courts have ruled in favour of consumers, indicating that the bank did not provide enough information and the brochure used language which was inaccessible for inexperienced consumers. There was also no information about the fact that the product was subject to stock markets fluctuation.