5 Hotspots in investment contracts
For the Supreme Court, the lack of evidence about information should harm the financial institution and the four year shelf life not start running until they had knowledge of the error.
The Civil Chamber of the Supreme Court, It has spoken about these five points which are often controversial in most litigation investment contracts, in Judgment 16 September 2015.
The case concerns a complaint by a customer against Bankinter Preferred partitions an Icelandic bank, with which he lost just over 57.000 euros. The lawsuit, He requested in the first place invalidity by mistake on consent and alternative compensation for damages resulting from careless performance of the bank in their duties as commission, provider of investment services and securities depository.
The Court of First Instance No. 87 Madrid was granted the application and declared the invalidity of the contract, Bankinter condemning the payment of principal with interest and costs. It considered that the preference shares were placed Landbanski recommendation of Bankinter, no report on the characteristics and risks of the product acquired (perpetual, illiquidity, issued by a foreign entity, risk of capital loss). The order did not have enough information and when problems arose, Customer also reported.
And the Judge, expiration rejected the argument made by the bank, considering that this was a nullity (which has no expiry date).
Bankinter appealed to the Madrid Provincial Court reversed the judgment of the first instance. For the bank, the lack of consent and this determines the nullity, It has a shelf life of four years. And in his defense, He considered that it could not assess negligent conduct bank, for not reporting a risk of insolvency, it was unknown.
For Hearing, the customer should have gone to the CNMV if I wanted more information. And considers there was not advice.
So the client, interposed extraordinary appeal for procedural infringements and appeal.
The extraordinary appeal for procedural infringement relates basically to the burden of proof. The appeal is based on Error on consent and obligations commercial commission.
The burden of proof
For the plaintiff, infringed Article 217 LEC in the judgment of the Provincial Court that the complainant attributed the negative consequences of the lack of evidence of the information was a duty to the bank.
For, no record that he had informed SoBe product characteristics and risks of the investment. For the Board, in these circumstances,
"There was a presumption of excusable error on the consent of the essential elements of the product and distorting it, was necessary test information the existence of a sufficient and clear, provided with adequate advance (….)”.
"The lack of proof of the existence of such information can not harm the client, but the investment services company ".
Therefore, Judgment of the Provincial Court violates the rules of the burden of proof.
That is the criterion followed among others, by la 9th Section of the Provincial Court of Valencia, which expressly states:
"The proof of the information is pre-test error”
in the following statements:
29/04/2015, 25/02/2015, 18/02/2015, 11/02/2015, 02/02/2015, 17/12/2014, 11/12/2014, 03/12/2014, 22/10/2014, 16/07/2014, 23/06/2014, 20/02/2014.
On the expiry date
The shelf life to bring an action for annulment is four years from the completion of the contract, as set out in Article 1301 Civil Code. And that consummation does not occur until the contract has not finished producing its effects.
The Lounge, cites Judgment of the Plenum of the Supreme Court of 12 January 2015. It stated that Article 1301 CC It should be interpreted according to the social reality, that is extraordinarily more complex today at least as it relates to investment contracts, and therefore:
"In short, no puede privarse de la acción a quien no ha podido ejercitarla por causa que no le es imputable, como es el desconocimiento de los elementos determinantes de la existencia del error en el consentimiento.
Thus, in complex contractual relationships are often as those arising from banking contracts, financial or investment, the consummation of the contract, for the purposes of determining the starting time of the exercise period of the action for annulment of the contract by error or fraud, It can not be fixed before the customer may have become aware of the existence of such error or fraud. The initial date for exercise of the action is, therefore, the suspension of the settlement of benefits or interest accrual, the application of management measures agreed by the hybrid instruments FROB, the, and general, another similar event that allows real understanding of the characteristics and risks of complex product purchased through a consent vitiated by error ".
Therefore, if the applicant had no knowledge of the determinants error occurred until the intervention of the Icelandic bank, the only limitation period begin to run from the moment.
On the advice
In another vein, the Supreme Court finds that there advisory, the product being offered by Bankinter customer. To have counseling, It is not essential that there be a written contract.
"Just that the initiative emanates from the investment firm, it is the one offering the product to your customer acquisition recommending "
Bank of negligence
The Chamber considers it appropriate criteria of the Provincial Court when it states that do not appreciate negligent conduct bank.
"One thing is that Bankinter, when he offered the applicant hiring preference shares, I could not know that the Icelandic bank went into insolvency and other different is that he did know that there was the risk of insolvency ".
Can not accept the thesis that the bank is not required to warn the credit risk is an inherent risk in all capital market. This risk, He should have been warned.
Therefore, the breach by the defendant of information standard error implies that the applicant is excusable.
And the risks inherent in the product, They are part of the cause in an investment contract.
Also, the obligation to inform "It is an active duty, availability not merely " (SSTS 18 April 2013 and 12 January 2015).
About the investment profile
The Provincial Court considered that the client had a Expert Profile. However for Supreme Court, said end has not been tested. As he indicated in its judgment of 12 January 2015:
"Neither Having considerable wealth, which it determined its classification as a private banking client (which it is a score made by Banco Santander, not by the client itself), alone determines whether it is an expert in customer investments ".
And the fact of having an other investment products advised by the bank, Customer also become an expert, if the bank does not prove that these other products are properly informed. Only prove that the bank is "backsliding" in its failure to disclosure that is required:
"And the fact alleged by Banco Santander that the applicant had made some investments (in the meter readings investment portfolio provided as document number 8 shows two, an acquisition of concerted preferred with a difference of five days on the contract at issue in the dispute and that the applicant claims he was “placed” in the same promotion and an investment fund of Banco Santander own) becomes not expert customer either in, since it is not proven that in such cases the applicant was given adequate information to hire the product knowing and assuming the risks of a complex investment without guarantees. Hiring some investment products advised by Banco Santander (some on the same dates as life insurance “unit linked”), without the bank proving that the information given to the customer was required by the rules of the market, You can only specify the recurrence of the financial institution in your misconduct, not the expert character of the customer ".
Ultimately, it estimates the resource of the client, the judgment of the trial court confirmed, getting the client recovery amount invested.
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