On November 16, 2001, DWS lost its second lawsuit:
He had been sued by a disappointed investor.
On the stock exchange newcomer AWD up to 70% of the investment volume from approximately 14,000 mediated business come as adhesion potential ? plus legal costs and interest from lost investment income (around 6% p.a. is usual). This results in a potential liability of more than DEM 1 billion.
According to the market capitalization of AWD AG, halving of the share price is not out of the question:
At the time of the IPO, the risk of litigation had been estimated at a comparatively paltry DM 4 million. A reason to think about whether it could be an obvious violation of the WpHG and § 264 a StGB (capital investment fraud).
Required Reading:
The Regional Court of Hanover has made it clear that since the so-called BOND judgement there are so-called cardinal obligations for the intermediary or advisor in matters of capital investment. The AWD advisor should have taken note of the trade press.
He should also have expressly drawn the customer’s attention to the critical reporting, so-called negative media reports.
The omission of a reference to the trade press or obligatory reading of the financial advisor leads to the damage: The capital investor may now simply claim that he would not have participated in the DLF fund if he had known something about the press reports.
In such cases, the court assumes that the investor would have refrained from joining.
Nor would the investor have taken out a loan to finance it.
Consequences are then:
AWD structure distribution damages 70% of the 20,000 DLF fund investors
a) reimbursement of the subscription amount (or Takeover of the
loan in the case of loan financing of the DLF fund participation),
(b) reimbursement of interest on loans in the event of financing of the fund’s investment
c) Compensation for loss of profit of approximately 6%.
(long-term interest rate of the capital market),
(d) payment of the costs of proceedings for one or two instances.
Particularly in the case of credit financing of the fund participation, this can result in a doubling of the capital – after 7 or more years – so that instead of the planned DM 4 million, DWS may well incur losses of up to DM 2 billion.
Thus the AWD board is not only exposed to 14,000 capital investors who want to have their money back. In addition, there are those shareholders who would not have invested in AWD AG if they had known the amount of the liability potential. The public prosecutor’s office will have to clarify, if necessary, how the prospectus publishers arrived at the amount of 4 million, which is a little too low, in line with the prospectus: After all, this approach seems to be too low by a factor of up to 500 ?
This case shows once again that investment advice is often flawed and appears to be driven solely by “commission interest”:
The Kanzlei RA Dr. Johannes Fiala (Munich) complains in such cases against selling and/or initiators.
by Dr. Johannes Fiala
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About the author
Dr. Johannes FialaPhD, MBA, MM
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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