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Recovering your assets: wrong investment consulting, faulty asset management, cluster risks

We are here recovering your assets – wrong consulting, errors in asset management and cluster risks. Some Clients contact us first by email or telephone. If their concern sounds interesting and the amount in dispute is high enough, I ask the customer to send documents and to give me a power of attorney, including a release from the bank secrecy. Mostly the cases are about implementation of the risk profile and investment profile against agreement. The bank has not differentiated enough and thus is responsible for the creation of cluster risks. According to the newest leading case by the federal court the bank has a duty of notice, meaning it is obligated to warn a customer if he wants to invest too much money in a single share. If the customer still invests in a single title and the market value of the title loses in value, the bank is liable for the loss as long as it has forgotten to document the warning on record or has otherwise failed to document the warning according to law. Based on the MiFid Rules the duties of the banks have been tightened. The bank has nowadays an extensive duty of disclosure, which it has to document accordingly in the file. Only through adequate documentation can the bank exclude the risk of lack of evidence and exculpate itself. If the bank fails to put the explanations it has given the customer on record, or does it only superficially and incompletely, it risks finding itself lacking evidence in case of a conflict because it cannot prove in front of a judge that it has sufficiently informed and warned the customer.

The bank has to document the risk and investment profiles in writing. It has to speak to the customer and find out, which experiences the customer might already have in the investment business and whether he has the background and training to understand the offered financial products. It has to assess the risk carrying capacity of the client and above all to document it. The less a customer knows about investment products the more important becomes the duty of disclosure of the bank. A relationship manager is usually under a lot of stress and it happens occasionally that he does not find the time to document everything in the file. If he saves time in the wrong place and omits to document the content of his conversation with the client in the file, it can become very expensive for the bank. By virtue of a leading case judged by the Federal Supreme Court handing out standardized forms from the bank, in which you can find the information only in writing and small print, does not suffice for every client – only for experienced and qualified investors. There has been a lot of media coverage in the cases of Madoff and the Lehman Brothers. Those cases are about the duty of disclosure of the consultants. The consultant has to make sure that the client has understood how a product works. That does not suffice, though. The banker has to document on record that he has explained the product and that the client has understood his explanations.

As a result of this new investor-friendly legislation the chances of the investor to be compensated for a sustained loss by the bank have grown immensely as of late. It pays off all the more, therefore, to bring the bank file to a specialized lawyer for examination in case of a financial loss.

12% Stock-exchange, securities, commodities and currency transactions

12% of our cases relate to wrong accounting of transactions. Fund shares or any kind of transactions may have been wrongly accounted. Even in the era of computers accounting errors may happen easily. The banks are exposed to increasing pressure and higher competition in pricing. The staff is not as well trained anymore. Whereas the products, for example hedge fund products, become more and more complicated and demand more of the special knowledge of the responsible securities accountants. Errors in the six figure range may easily creep in and can only be found by manually collecting, listing, examining and reconstructing all the credit and debit advices, reconstructing every correction entry and checking each exchange position. The probability that there have been huge damages in such cases is really high and can only be detected by reconstructing, examining and recalculating each and every transaction in arduous handiwork. Recovering your assets can be a hard work. It may well be that during the examination of the hedge fund accounting, one finds something entirely different. For example in recalculating everything it has been discovered that the issuer of all the hedge fund products has always been the same one, which represents a cluster risk. The bank should have differentiated the risk of the issuer and chosen different issuers. We have our own hedge fund specialists helping us for complex calculations. In such cases one has to ask oneself whether someone is getting kick-backs from their favorite issuer. And that was the case with one client we represented. Thus the case has been solved quickly and the bank has soon given in to us during the negotiations and had to compensate our client for the lack of diversification.

10% Credits, collaterals and other hedging transactions

In those cases it is important to reconstruct the history of the case and find out in retrospect who has become insolvent and why, whether the contracts fulfill the legal regulations and who was liable as bondsman.

21% Account movements, payment transactions, credit cards

The cases in this category are manifold. Often the signatures have been forged in case of payment instructions, wrong fees have been accounted, commissions too high demanded and so on. Depending on the situation the bank may have to pay for sustained damages. Each situation has to be examined and assessed individually. Sometimes the client has helped with so-called compensation payments. Such payments are not looked upon as a private matter anymore. The FINMA does not turn a blind eye. Compensation payments are being sanctioned and the participants are held liable.

10% Miscellaneous: US citizens, fiscal evasion and tax fraud, trusts, foundations, Waqf, testaments, mailing, bank secrecy, international legacies, post-mortem power of attorney, succession conflicts, blocked accounts, accounts without information, dormant accounts, politically exposed persons (PEP accounts), potentate money, country risks etc.

The chances for the client to be compensated by the bank or the asset manager are much better

Whereas the banks have been more generous in compensating in the past, nowadays negotiations are much more tenacious and tough. Especially the adjustment of claims can become very complex, in particular if the hedge funds have applied complicated mathematical schemes. The banks may be more tenacious in negotiations, but the chances of being compensated have increased considerably. The protection of investors has improved massively.

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Call +41 44 212 44 04 immediately during office hours, or send an e-mail to contact@swiss-banking-lawyers.com
In urgent cases call our mobile phone +41 79 790 44 44

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