Investment advisors are liable for failure to inform about the lack of resale opportunities of closed-end investments/funds.

Politics, Law & Society
Press release by: Law Firm Dr. Johannes Fiala
PR Agency: Dr. Johannes Fiala
Every year, investors invest tens of billions in so-called closed-end investments – only a fraction perform according to the specifications in the prospectus. The Federal High Court (BGH) decided now for the first time (judgement of 18.01.2007, Az. III ZR 44/06) that investment consultants have to clear up unasked over the fact that the portions of closed participation (e.g. GbR funds, KGFonds) are usually not or only very limited saleable, because there is no appropriate market for it. This refers to the question of liquidability or tradability (fungibility). The BGH clarified that the possibilities of converting an investment back into liquidity also play a decisive role in the case of investments for retirement provision: The investor can, for example, change his investment objectives, become unemployed or ill. In case of doubt, an investment advisor will therefore have to clarify the risk capacity in addition to the risk appetite: In practice, investment advisors inquire too seldom about the overall asset structure and the existing protection against risks. This can create liability, especially if the advisor lacks insurance expertise. Only if the investment advisor can assume that the resale is recognizably without significance or the risk of the lack of resaleability was clearly pointed out in the prospectus, an advisory duty can be omitted: However, the investment advisor must ensure that the investor has read and understood the prospectus. However, the vast majority of investment advisors do not have sufficient documentation for these and other disclosure obligations. In practice this means that investors are offered thereby a further possibility of reversing their investment risk, thus the bad development of the closed participation, to loads of the investment advisor still after years. Investors have it thereby particularly easily, if the investment advisor did not close clean contracts and does not possess liability-reducing documentation.
Contact: Kanzlei Dr. Fiala De-La-Paz-Str. 37 80639 Munich Contact: Ingeborg Weiler E-mail: Tel.: 089 17 90 90 0 Dr. Johannes Fiala, Lawyer (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 (
( (07/24/2007))

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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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