Sales commissions: Concealment leads to compensation for damages

Consultants need to inform their clients about the commissions, even if they do not have to reckon with it.

A lawyer sued a bank because the investment consultant had not pointed out additional sales commissions and a possible debt repayment obligation. The lawyer had been advised by a bank investment consultant of “Hollandfonds”. For this, she paid asset-based fees (premium) of 3.5 percent. However, the consultant hid the sales commission between 3 and 4.5 percent from the issuer. Despite the negative business success, the claimant received “solvency distributions”. These were not covered by a profit from the companies. For this reason, she would have been obliged for repayment.

Now the lawyer took a legal action against the bank and demanded the repayment of the amounts she had invested. In addition, the bank should be liable for future debt repayment obligations.

The investor is partially responsible

The Court of First Instance accepted the claim in its entirety, and the Court of Appeals dismissed the declaratory request. The Austrian Supreme Court gave the claimant only a partial right.

The sales commissions create the risk of a conflict of interest on the part of the investment consultant. The consultant has to inform investors about third-party commissions, even if they do not have to reckon with it. The lawyer already paid a commission and therefore made additional payments. If the duty to provide clarification is violated here, the right to compensation for damages exists. However, the Austrian Supreme Court also pointed out the responsibility of the investor. As an experienced investor, she has to read the risk references. She thus contributed to the unwanted acquisition of the participation herself. Therefore, half of the plaintiff’s claim was dismissed.

Source: Supreme Court 

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