Investment Mis-selling Claims: an Overview of Recent Case in Hong Kong
Q: Are there many lawsuits in Hong Kong brought by investors against their banks for alleged mis-selling of investment product?
A: Yes. Due to downturn in financial markets, many wealthy private banking customers took a bath and brought lawsuit against their banks alleging mis-selling of investment product resulting in their losses.
Q: What ground are those investors relying on in lawsuit to claim their losses?
A: Those investors based on the allegation of negligent misrepresentation and breach of contractual and/or tortious duties of care and breach of regulatory duties to sue their banks for compensation.
Q: Did the local court in Hong Kong support the investor’s allegation of negligent misrepresentation against bank?
A: No. The courts hold that those investors are sufficiently sophisticated and educated to understand, and did understand, the essential features of the investments and risks and potential exposures attached to those investments, and that the investors reach their own decisions after taking into account the recommendations and views of the relationship manager of the banks. Also, the courts hold that, even if there had been misrepresentations, the bank’s standard terms established a contractual estoppel, which meant that an investor was estopped from asserting that he/she did not understand that the risks associated with the investment, that he/shed did not make independent decisions when deciding to invest in those products, and that he/she did not understand the characteristic of the investment.
Q: Did the local court in Hong Kong support the investor’s allegation of breach of contractual and/or tortious duties of care and breach of regulatory duties?
A: No. the courts hold that it was not possible to imply a duty into a contract which was contrary to its express terms, which stated, eg, that the relationship was execution only, that the bank was not required to provide any advice, that any recommendation or house view provided should not be regarded as "advice", that the bank assumed no responsibility for the accuracy and completeness of any information provided, that the investment was made solely upon the customer's judgment and at the customer's discretion, and that the customer should obtain separate legal or financial advice.