Financial malpractice, miscounseling or misselling by German Banks – German Banking Lawyer informs
Wednesday, 28th February 2017, 10.30 a.m.
Financial malpractice has become a major subject in German banking law and German capital market law over the past few years. Prominent German banks including Deutsche Bank, Commerzbank and UniCredit have been sued for compensation, according to German lawyer Louis G. Roensberg, who is a certified lawyer in German banking and capital market law (“Fachanwalt für Bank- und Kapitalmarktrecht”). German attorneys (Rechtsanwälte) claimed improper advice in connection with private or corporate investments in funds (“Fonds”), bond loans (“Anleihen”), certificates (“Zertifikate”) and swaps.
Professional liability for financial advisors in Germany
Under German jurisdiction an unwritten financial consultancy contract (Beratungsvertrag) is formed automatically whenever a financial advisor gives advice to a customer. Furthermore, the German Federal Court of Justice, “Bundesgerichtshof” or in short “BGH”, decided in 1993 in its so called “Bond-Verdict” (“Bond-Entscheidung”), that this unwritten consultancy contract obliges the financial adviser first to recommend only financial products which are appropriate for the investor (so-called “anlegergerechte Beratung”). Secondly the advisor has to inform the investor of all the risks related to the financial product (so-called “objektgerechte Beratung”), says German lawyer Roensberg. Under German jurisdiction, a financial product fits to the investor when it matches their investment target (for example “retirement provisions” as opposed to “speculation”), their readiness to assume risk and the extent of their knowledge.
Suing a German bank or German financial adviser for compensation
Whenever a German financial advisor miscounsels as described above, the German bank who employs them has to compensate the damages in kind. Independent financial advisors have to compensate the investor on their own. If the amount of damage is higher than € 5,000, the lawsuit has to be filed with the District Court (“Landgericht”), usually in the district where the investor lives or where the German bank has its legal domicile, depending on whether or not the investor is by German civil law a private customer (so-called “Verbraucher”). At German District Courts, representation by a German lawyer is mandatory. The court fee in Germany is based on a sliding scale and depends on the value of the claim or financial interest of the claimant. For example, a regular case with a value of € 10,000 would incur a court fee of € 723. With a value of € 50,000 the court fee would be € 1,638.
German Law of Limitation under the German Securities Trading Act and Civil Code
However claimants have to consider the German Law of Limitation, German lawyer Louis G. Roensberg warns. Claims based on financial investment contracts that were formed between 1st April 1998 and 4th August 2009 usually fall under the former German Statute of Limitation clause 37a WpHG (German Securities Trading Act) and lapse three years after sign of contract. Investment contracts signed later fall under the regular German rule of limitation (clauses 195, 199 BGB, German Civil Code). These claims of compensation can also be made within a three year period which commences at the end of the year in which the claim arose and the investor obtained knowledge of the circumstances giving rise to the claim, or would have obtained such knowledge if these had not shown gross negligence. The maximum period is ten years.