Discussion of the judgement of the BGH of 12.07.2007

The Federal Supreme Court (BGH) has clarified by judgement of 12.07.2007 that it is sufficient to hand over a prospectus to the capital investor instead of informing orally in person. This means a considerable reduction in workload. Dr. Johannes Fiala, Attorney at Law (Munich), MBA Financial Services (Univ.Wales), MM (Univ.), Certified Financial and Investment Advisor (A.F.A.), Lecturer in Civil and Insurance Law (Univ. of Cooperative Education), Banker, (www.fiala.de), has reviewed the judgment. Excerpt from the judgement discussion: After the iurisdiction a folder delivery, in particular two weeks before the An-tragsunterzeichnung, is sufficient. However, the prospectus must be “suitable in form and content” to convey the information “truthfully and comprehensibly”. It is urgently advisable to demand an IDW S4 prospectus expert opinion from the initiator – otherwise a prospectus will only be verifiable for a few intermediaries, for example with regard to its truthfulness. And: While an advisor must expressly point out the lack of fungibility of closed investments in almost every case (BGH Az. III ZR 44/06), the defendant broker benefited here from the fact that this point had not been of importance for the investment decision. In general, an intermediary may not suggest to the investor that his oral explanation can replace a reading of the prospectus or makes it superfluous. It is the responsibility of the investor to read the prospectus and, if necessary, to ask for further guidance on the information contained in the prospectus. It is crucial that the prospectus contains “risk information that is comprehensible and sufficient for an average reader” (objective recipient’s horizon, §§ 133, 157 BGB), because the investment intermediary only owes information – i.e. information. And: In the case of investment advisors, on the other hand, it often depends on the subjective understanding of the investor, because the investment advisor not only owes information, but also an evaluation (does the investment suit the customer?). The adviser can therefore be held liable simply because his risk warnings were not understood by the investor. In practice, many intermediaries act as advisors – be it through their letterhead (“consultant, economic advisor, etc.”) or simply by entering into an investment advisory process in an argumentative manner. Without precise documentation, “only an investment brokerage” instead of “already an investment advice” will often be difficult to prove in court. Guiding principle of the BGH: On the duty (denied in the concrete case) of the investment intermediary to inform the prospective investor about the risks of the participation in a closed-end real estate fund operated in the legal form of a partnership under civil law, if the intermediary has handed over to the interested party in due time a prospectus about the capital investment which is suitable in form and content to convey the necessary information truthfully and understandably (following BGH, judgement of 21 March 2005 – II ZR 140/03 = WM 2005, 833).
(DA No 33A.07 of 15.08.2007, p. 4)
Courtesy ofwww.direkteranlegerschutz.de.

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Dr. Johannes Fiala Dr. Johannes Fiala

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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