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Key funder of claimant group has stock market listing suspended. By Ian Fraser

Investors suing the Royal Bank of Scotland over the bank's allegedly "misleading" £12.3 billion rights issue have suffered a setback after a key funder backing one of the claimant groups had its stock market listing on the Channel Islands Securities Exchange (CISX) suspended.

Royal Bank of Scotland is being sued over an allegedly misleading £12.3bn right issue

Jersey-listed Argentum Capital, which is providing the funding to Stewarts Law, had its listing suspended by the CISX on February 21.

Stewarts Law is a specialist London-based law firm that is suing RBS on behalf of Strathclyde Pension Fund, the Mineworkers Pension Fund, Europe's largest pension fund APG, and nine mutual funds managed by Dutch bank ING. Overall, Stewarts Law, which is working alongside Delaware-based lawyers Grant & Eisenhofer, is representing 77 institutional investors who acquired a total of approximately 220 million shares in the rights issue worth £440 million.

Argentum Capital is one of a number of specialist third-party litigation funders taking a punt on a positive outcome for investors.

The RBoS Shareholders Action Group, represented by solicitors Bird & Bird, has entered into third-party funding agreements with Harbour Litigation Funding and Vannin Capital.

Clive Zietman, head of commercial litigation at Stewarts Law, said his firm was aware of the issue but had no comment.

Argentium said: "As advised by the Channel Islands Security Exchange Authority Limited to the company, the reason for the cancellation of listing was that the company was not in compliance with those provisions of the rules requiring there to be an adequate market in the company's securities."

The legal costs related to the rights issue law suit against RBS - into whose shares the claimants claim they were duped into putting £12.3bn of investors' money in April 2008 following the publication of a "misleading" rights issue prospectus - have become immense.

The bank, then led by Fred Goodwin, needed to bailed out with £45.5bn of taxpayers' money five months after the rights issue completed.

RBS's lawyers Herbert Smith ­Freehills last September told the High Court it would cost £41.8m to defend the bank and four of its former directors - Tom McKillop, Goodwin, Johnny Cameron and Guy Whittaker.

This compares to Bird & Bird's £10m to £13m estimate for acting on behalf of the RBoS Shareholders Action Group, which represents 12,000 individual investors and more than 100 institutional investors, and Stewarts Law's £8.5m costs prediction.

Philip Marshall QC, representing the action group, last December told the judge that RBS's £41.8m costs estimate was "intimidatory", meaning deliberately designed to scare off litigants. The size of the Herbert Smith estimate has made securing after-the-event insurance cover - which pays costs in the event of cases being unsuccessful - critical for all the claimant groups.

The other two groups of claimants, which have not yet served writs on the bank, are led by the US law firm Quinn Emmanuel Urquhart & Sullivan and the London firm Leon Kaye Solicitors. In December, Judge Mr Justice Hildyard gave Quinn Emmanuel and Leon Kaye until the next case management hearing on May 23 to either issue proceedings or confirm they are issuing proceedings.

Leon Kaye senior partner Leon Kaye, representing more than 8000 ­individual investors, said "I propose to issue ­proceedings before the limitation period expires."

The rival litigants are the Quinn Emmanuel group, believing its clients - Legal & General, Prudential, Scottish Widows, Standard Life, and the Universities Superannuation Scheme.

It is understood their joint claim could be worth around £1.3bn.

RBS says it has "substantial and ­credible legal and factual defences".

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