Subordinated Debentures of Banco Popular canceled in Oviedo

obligaciones subordinadas banco popular

a subscription of subordinated debentures issued Banco Popular is canceled in 2011 for lack of information

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The Court of 1st Instance number 11 Oviedo in sentence 23 February 2018 He has canceled a contract underwriting subordinated bonds of Banco Popular for being the error vitiated consent, By failing to fulfill its obligations financial institution information.

Antecedentes

The applicant was Banco Popular client for more than 20 years old and he had deposited his personal savings and family. Already in the year 2009, the Bank will put a convertible shares, which they were the subject of legal claim, estimated by the Court of 1st Instance No. 2 Oviedo. In said process and it was found the conservative profile of the customer and as a consumer and retail.

The plaintiff had no training or work experience related to the financial world.

In September 2011 He was offered by telephone and then in person investing their savings in certain obligations with interests 8,25% during 10 years and availability of liquidity in few days, to which the complainant accepted, signing an order of values ​​"OB. SUB. BANCO POPULAR VT.10-21 "worth 10.000 €. Also, a document was signed that, in the words of the court "Stated not having completed a test so the bank does not evaluate the suitability of the product but the Bank reported its nature and risks (without indicating which ones are) and that the client says he has decided on its own and based on their own estimates hire; and summary of the conditions of the emission ".

The client filed a complaint to request nullity of contract acquisition subordinated obligations issued by Banco Popular 10,000 €, by an error in the provision of consent for lack or inadequacy of information concerning the legal nature and characterization of the contract. In the alternative breach of contract action was exercised for lack of fulfillment by the bank of their duties in product marketing.

The People's Bank claimed the expiration of the action on the grounds that since the conclusion of the contract until the application was lodged more than four years had elapsed period established by Article. 1301 the C.C.

He also argued the validity of the contract because it was informed of the risks of the product and claimed to have fulfilled its obligations to market the product.

Para decidir, Judge made the following arguments:

Expiration

Said the judgment of the Court no.11 of Oviedo that the doctrine outlined in the judgment of the Supreme Court should apply 769/2014, of 12 January 2015 and the 20 December 2016 where it noted:

In interpreting the art today. 1301 CC in relation to actions that pursue the annulment of a banking contract or investment concurrence of vice of consent, You can not ignore the interpretive criterion on 'the social reality of the time that [the rules] They must be applied primarily serving the spirit and purpose of those ', as provided for in art. 3 CC.

[…]

Ultimately, 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 acquired by a consent vitiated by error,,es,According to this reasoning,,es,the dies a quo may not be the date of subscription of the bonds,,es,but the moment that definitively set the value of the lost,,es,the deadline for bringing an action for annulment had not expired at the time of the filing of the complaint,,es,As for the lack of passive legitimation by the fact that structured bonds subscribed have been issued by BNP PARIBAS and not by BANKINTER S.A.,,es”.

Applying the law to the case study, He understood the judge should fix the time Start the expiry date given the date of conversion of bonds into shares, it was in June 2017 after the communication sent by the Bank to the client running the Governing Committee of the FROB 7 June 2017, inasmuch as only then the customer became aware of the risks associated with your product.

Nullity of complex products

In the judgment, it is considered that OBS is a complex product, which it has some requirements on emission rate, information and assessment of their suitability and suitability to the customer, for whose understanding higher than the overall profile of the bank customer financial training is required; so that financial institutions must prove that, before entering into the transaction, customer has provided an information document product characteristics, thus ensuring the principles of transparency and clarity, as stated in Articles 79 bis de la Ley del Mercado de Valores, 62, 60 and 64 Royal Decree 217/2008, of 15 February.

Said the sentence "These regulations guarantee to customers that are commonly called suitability analysis and is the highest level of protection provides to retail customers. In the event that the product is consistent with the investment objectives and financial situation of the client, the broker can not recommend hiring”. It is therefore important that financial institutions seek necessary and sufficient financial information of its customers to assess the suitability of the product for the customer.

the jurisprudence established by the Supreme Court ruling of reminded 20 January 2014 on the content of the duties of information by marketing complex financial products with retail customers, to appreciate error defect of consent determining nullity of the contract:

The complexity of financial products favors an informational asymmetry in their contracting, which has led to the need to protect retail investors not experienced in their relationship with the financial services provider. As revealed in the doctrine, This need for protection is accentuated because financial entities when marketing these products, because of their complexity and the outlined information asymmetry, They not limited to distribution but provide customer service that goes beyond mere aseptic and information on financial instruments, to the extent that help the client to interpret this information and make the decision to hire a particular product.

[…] these duties respond to a general principle: all clients must be informed by the bank, before the contract was, of the risks involved in the speculative operation in question. This general principle is a consequence of the general duty to act in accordance with the requirements of good faith..

Regarding information on financial instruments, jurisprudential doctrine indicated:

[…]

These duties (art. 79to LMV) they are not limited to the fact that the information directed to your clients is impartial, clear and not misleading (paragraph 2), but they must also provide, ‘In an understandable way, adequate information on financial instruments and investment strategies', that ‘must include guidance and warnings about the risks associated with such instruments or strategies’

In its section 2 (art. 64 RD 217/2008), specifies that ‘in the explanation of the risks must include, when justified based on the type of financial instrument in question and the knowledge and profile of the client, the next information:

a) The risks associated with this type of financial instrument, including an explanation of leverage and its effects, and the risk of total investment loss.

b) The volatility of the price of that type of financial instrument and any market limitations, or markets, in which it can be negotiated.

c) The possibility that the investor, assume, in addition to the acquisition cost of the financial instrument in question, financial commitments and other additional obligations, including possible legal liabilities, as a consequence of carrying out transactions on that financial instrument.

d) Any mandatory margin that may have been established or other similar obligation applicable to that type of instrument ’".

De otro lado, Regarding the evaluation of convenience and suitability that the bank must carry out, the aforementioned doctrine indicated by the Court of 1st instance no. 11 Oviedo:

[…] should value the client's financial knowledge and experience, to specify what type of information must be provided to you in relation to the product in question, and, where appropriate, issue a judgment of convenience or suitability.

[…]

This test assesses knowledge (studies and profession) and experience (frequency and volume of operations) customer, in order that the entity can get an idea of ​​its powers in financial matters. This evaluation must determine whether the client is capable of understanding the risks involved in the investment product or service offered or demanded., to be able to make informed investment decisions. […]The suitability test operates if an investment advisory service or portfolio management has been provided by making a personalized recommendation.

[…]Thereby, the Court of Justice understands that the recommendation to sign a swap will be considered investment advice, by the lender to the investor client, “that is presented as convenient for the client or is based on a consideration of their personal circumstances, and that it is not disclosed exclusively through distribution channels or intended for the public”.

The breach of the duty of information does not necessarily imply the existence of the error vice of consent, but if you allow your presumption, and thus it is considered that such a vice occurred due to the absence of information prior to hiring. The plaintiff was ignorant of the essential elements of the contract.

In view of the above, the existence of false representation regarding the nature and risks of the contract was examined in the judgment, since to cancel it it is necessary that the error has sufficient importance and is not attributable to the negligence of the client.

Before a retail customer such as the plaintiff, financial entities had to ensure the suitability and convenience of the products and provide complete information, enough and in advance, about the risks it has, as also indicated by arts. 72 a 74 of RD 217/2008, of 15 February.

It was finally highlighted that the information had to be delivered well in advance to the signature and concludes that:

in this case all the documents on which the defendant relies are simultaneous to the signing act, which shows the lack of prior and detailed information, that would allow the client, calmly, analyze the suitability of the investment. Therefore, the defendant violated the obligation to inform potential customers when offering the product, well in advance of signing the contract”.

Conclusion

Ultimately the Judge considered that in the case studied “There is an error in the provision of consent that, if qualified as essential and excusable, referring at this point to what is stated in the judgments mentioned above, for which purpose the goodness of the product or its convenience for the customer is not relevant, but if he had sufficient knowledge of this complex product and the specific risks associated with it, which presumes the existence of the error, Unless there are circumstances in the client that allow to discard the existence of the error.

Therefore, the sentence declared the nullity of the contracts for the purchase and exchange of subordinated obligations of Banco Popular, with a condemnation of reciprocal restitution between the parties of the benefits that have been the subject of the same, the defendant having to return the subscribed capital, increased in statutory interest since delivery; and the plaintiff handing over the securities received and paying the defendant the amount of the returns obtained from the subscribed obligations, increased in the legal interest accrued since its payment.

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