Meinl European Land (MEL) share certificates
From 2005 to 2007, Meinl Bank aggressively sold share certificates of the real estate company Meinl European Land (MEL) to consumers in Austria. These instruments were widely advertised, also in TV spots, using the slogan “as safe as a savings account.” The Meinl name – the name of a very well-known entrepreneurial family in Austria – had been synonymous with respectability for decades and was emphasized in the marketing. The advertising promised a gilt-edged investment with annual returns of over 10%. This misleading advertising managed to reach broad segments of the population and to a great extent, small investors who had never had anything to do with securities. The share certificates were touted to them as being “as safe as a savings account.”
In 2007, it became known that the real estate company MEL had used the raised funds primarily to buy back its own securities without informing investors that it was doing so. This caused the price of the certificates to plunge and led to major losses. A few thousand injured parties who had reported to the Austrian Federal Chamber of Labour (BAK) had, on average, invested €23,000 and lost €16,000. BAK set in motion the legal processing of this case by filing a lawsuit alleging unfair business practices. In 2017, the Austrian Federal Chamber of Labour reached a settlement with 5,500 investors who had lost money. Meinl Bank paid compensation to over 3,600 investors, who received damages totalling €13m.