Room service brokers sued

SHAREHOLDERS in the collapsed Room Service Group have launched court claims against seven stockbroking firms in an attempt to win compensation.

They claim excessive short selling of the shares triggered the group's failure last December.

The investors are targeting Evolution Beeson Gregory, Shore Capital, Winterflood Securities and online brokers comdirect, SELF trade, iDealing and American Express Sharepeople. They hope to bring claims to the High Court eventually.

The brokers have resisted the claims. They point to Room Service's debts before it collapsed and argue that short selling was legitimate.

The Financial Services Authority is nearing the end of an investigation and Evolution, the main broker, is fighting the threat of a £500,000 fine.

Hearings have begun in two cases so far and up to 80 are planned. Room Service was a tiny company and the total claims are small by City standards at £1.1m.

Market makers reportedly offered £140,000 to settle the affair some months ago, but investors turned this down.

Nigel Smith of the RSV Shareholders' Action Group said: 'We are individuals fighting this for private investors everywhere and their rights to a fair market.'