Business Law

Bank held liable for investing pension money in shipping funds

A German court has ruled that shipping funds are not a suitable investment option for a pension scheme. The bank that made the investments has been ordered to pay compensation.

Bank held liable for investing pension money in shipping funds ©-Thomas-Jansa-Fotolia

Bank held liable for investing pension money in shipping funds ©-Thomas-Jansa-Fotolia

Investment in shipping funds

The Heilbronn Regional Court, Germany, has ordered a bank to pay compensation to its customers. The judgment comes after the financial institution advised its customers to invest over half a million euros in shipping funds in order to secure a pension.

The court found that shipping funds are not a secure investment and ordered the bank to make good the huge loss its customers had suffered (case ref.: 6 O 299/13). The bank was also ordered to pay interest.

In justifying its decision, the court drew attention to the fact that the general characteristics of shipping investment funds go against advising them as a safe form of investment. This is because, so the court, there is a risk of losing 100% of the money invested.

Indeed, investing in shipping funds is always accompanied by a certain risk. It may be the case that dividends are recalled or that the capital is lost completely. The risk of losing investments in shipping funds has increased dramatically since the outbreak of the financial crisis.

Misleading investment advice

The judgment shows that if investors are given misleading investment advice, they are entitled to compensation. Investors who believe they have received false investment advice, should seek legal advice.

The bank has the possibility of appealing the judgment.

Christian Solmecke is a partner at the law firm WILDE BEUGER SOLMECKE. He is the author of numerous legal publications in the area of internet and IT law. He is also an associate lecturer for social media law at the Cologne University of Applied Sciences.

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