Financial investments: an adviser convicted of breaching his obligations to his clients

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Mr and Mrs E gave financial investment advice to Mrs B, a financial adviser. Believing that they had suffered losses attributable to the breach of their obligation by Mrs. B, the spouses sued her, claiming the sum of 885,000 euros for the loss of value of the portfolio and the loss of the chance of evaluation .

The inability of the board to fulfill its obligations

Mr. and Mrs. E entrusted financial investment assistance and advice to Mrs. B, a financial advisor. Believing that they had suffered losses attributable to the breach of their obligation by Mrs. B, the spouses sued her for payment, claiming the sums of 565,018 euros for the loss of value of the portfolio, 299,640 euros for the loss of value of this portfolio also. like 10,000 euros each.

Messrs. E reproached Mrs. B for not having respected the objectives set out in the engagement letter in which she had undertaken to issue a written and complete proposal including the balance sheet of the assets and liabilities of the Messrs. E, the evaluation. of their fixed and variable needs, the distribution of their needs, the distribution of capital according to their needs and, for the distribution of assets on deferred capital contracts, to wait for new fiscal measures.

The Court of Appeal rejected his request

The Court of Appeal of Rouen rejected their request, relying to this effect on the fact that “the signature of the spouses on the subscription forms produced is preceded by the mention that the subscriber knowingly chooses his means of investment , et en cas d’instruction sur un product different from his profile, he acknowledges that he was aware of the associated risks and assumes any future losses; that he also acknowledges having received the AMF prospectuses for each OPCVM”, and that Messrs. E, “for the choice of direct management with the search for income in the framework of a dynamic management with high risk have accepted the inherent dangers to investments on the stock market, their status as a non-professional investor not being sufficient on its own to characterize a failure on the part of Ms B.

Moreover, the Court of Appeal considered that Ms. E “do not demonstrate the existence of a fault on Ms. B’s part consisting of breaches of her duty to advise”, that “to characterize the breaches on the part of Ms. B , it was appropriate for spouses E to contribute to the debate on the elements relating to their global heritage and its evolution which could justify different management advice from those which could have influenced their choice through a precise analysis of the evolution of their situation on the entire period of execution of the mission of Mrs. B”

Considering “that the financial investment adviser is obliged to provide his client with advice adapted to his personal situation, of which he must provide proof of execution”, Mr. and Mrs. B appealed to the Cassation.

The Court of Cassation agrees with the clients

The Court of Cassation relies on the Monetary and Financial Code, according to which it follows that, before giving advice, financial investment advisers must ask their clients about their knowledge and experience in investment, as well as their financial situation and their investment objectives, so as to be able to recommend them the operations, instruments and services adapted to their situation. When clients do not provide the necessary information, financial investment advisors refrain from recommending to them the transactions, instruments and services in question.

The Court of Cassation considered that, without examining whether Ms. B was justified in having fulfilled her obligation to provide advice adapted to Ms. E’s personal situation, the Court of Appeal deprived its decision of a legal basis.

On the other hand, the Court of Cassation relies on article 1353 of the civil code, according to which the person who claims the execution of an obligation must prove it. Conversely, the individual who claims to be released must justify the payment or the fact that produced the extinction of his obligation.

The Court of Cassation therefore considered that it is incumbent on the person bound by the obligation to advise to provide proof of its execution.

For these reasons, the Court of Cassation agrees with Mr. and Mrs. E and annuls the judgment of the Court of Appeal.

Source: June 15, 2022 – Court of Cassation – Appeal No. 20-21,588

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