Two investors have filed a motion for authorization to bring a class action suit against Desjardins Financial Security. Prior to the financial crisis of 2008, Jean-Paul Dupuis and Francis Tremblay bought Strategic Index Plus (SIP) and Tactical Index Plus (TIP) term investments from DFS.

These capital-guaranteed products have a maturity of five to eight years. Thousands of investors must now keep these investments until their maturity simply to recoup their capital. There is no chance of earning a return, say the parties to the class action suit.

Depuis and Tremblay are requiring a refund of the monies invested in the SIP and TIP, plus interest and damages. If the suit is accepted it will involve all those who held either of these investments as of December 31, 2008. All such investors will be automatically included in the class action suit.

An expectation of returns

Since the main characteristic of these products is the offer of a capital guarantee, what is the basis of the class action suit? posed this question to Serge Létourneau of Létourneau Gagné, one of the law offices involved in the suit.

“Taking as an example a sum of $1,000, $800 was used to acquire a bond. After a period of up to eight years the capital was guaranteed. As for the remaining $200, Desjardins used it for its own investments in the securities markets,” Létourneau explains.

“Our complaint against Desjardins is that they did not adequately disclose the fact that the $200 was leveraged considerably—up to five times this amount,” Létourneau said. “Desjardins said to investors: you will never get the same performance the market can achieve, but neither will you be subject to its fluctuations and the losses it can cause. They created a reasonable expectation of performance by minimizing the real risk associated with the transaction,” the lawyer added.