ANOTHER group of Japanese investors sued Mitsubishi UFJ Financial Group’s (MUFG) joint brokerage venture with Morgan Stanley, the latest litigation over losses on Credit Suisse’s riskiest debt that became worthless.

A suit representing 26 plaintiffs was submitted to the Tokyo District Court on Tuesday (Dec 26) seeking to recover losses from so-called Additional Tier 1 (AT1) notes that were sold to them by Mitsubishi UFJ Morgan Stanley Securities. They are demanding a combined 1.7 billion yen (S$16 million) in compensation, according to the filing led by Yamazaki Marunouchi Law Office.

A representative of the company jointly owned by Japan’s largest lender and the major US investment bank was not immediately available to comment. Two of the plaintiffs are companies, according to the complaint.

The move followed a separate 5.2 billion yen suit filed earlier this year by the same law firm against the company on behalf of 66 different plaintiffs. In Japan, Mitsubishi UFJ Morgan Stanley Securities sold the securities more aggressively than any other firm, making up about two-thirds of the 140 billion yen of the notes taken up.

Global bondholders lost everything when Switzerland’s regulator wrote down about US$17 billion of Credit Suisse’s AT1 notes during its rescue by UBS Group, sparking lawsuits around the world. Investors in Japan have also sued the brokerage arms of SBI Holdings, Rakuten Group and Monex Group.

“It is uncommon in Japan for this many adversely impacted investors to file a group action against their brokerage,” said Matthew J Wilson, president and dean of Temple University, Japan Campus. “At the same time, it is equally uncommon for Japanese investors to lose their entire investment in a product due to the actions of a foreign government.”

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The crux of the debate in Tokyo hinges around whether sellers met know-your-customer rules as well as adequately explained to buyers the risks associated with the debt, including so-called viability events that would trigger a writedown.

The latest group of plaintiffs allege that Mitsubishi UFJ Morgan Stanley Securities violated a suitability principle by selling the bonds to regular investors even though the products are for professional institutions. Also, while the firm mentioned the write-down clause in a brochure, it fell short of offering extra explanations needed for such investors to assess what could constitute viability events, according to the complaint.

The brokerage has “mostly properly done our work” in handling the sales, Shinjiro Yamamoto, Mitsubishi UFJ Morgan Stanley Securities managing executive officer, said earlier this year. BLOOMBERG