– Liability for faulty, incomplete sales training – by RA Johannes Fiala, banker (IHK), certified financial and investment advisor (A.F.A.), business economist (M.B.A., Univ.), court-appointed expert (financial services sector), IHK examiner (Finanzfachwirt),www.fiala.de
Attorney Johannes Fiala explains exclusively for experten.de, at the example of the credit-financed pension, central solution beginnings, in order to come as advisors out of the liability trap. With over 20,000 adhesion processes per year it is for the mediator often a question around ?to be or not to be? The slogan reads ?let your damage nevertheless by involved banks, the product giver as well as if necessary the selling take over. This works more and more often?
The leverage model: In the leverage model, the client invests in an endowment policy (CLI) both his own capital and a multiple amount ? financed by a loan. The loan is occasionally taken out in foreign currency (Yen, SFR). The customer wants a private old-age provision, an ?immediate pension?, ?savings pension?, etc. Also bank bankruptcies let the investment burst. At the latest when a liquidator or insolvency administrator winds up the loan bank, the dream of the enormous yield bursts: The liquidator demands additional collateral or doubles the interest rate as soon as the fixed interest period has expired. Despite the fixed interest rate, an attempt is made to increase the price of the loan, allegedly because of the customer’s “reduced creditworthiness” ? before this, a questionnaire from the bank (self-disclosure) flutters into the house. After the millennium change the stock exchange bubble burst: The net yields and/or surplus sank of the two-digit range down into the cellar of low single digit yields. The financing sold with it was then usually more expensive than the yield from the KLV. Intermediary bankruptcy: If the customer could not or did not want to offer the further securities of the bank at the end, the nice leverage model was ?liquidated? and/or the credit commitment of the bank was ?reorganized?. mostly a mountain of ?rest?-debts remained: The customer then tries to get the lost money back from the intermediary ? usually with success. Few intermediaries think of the fact that there are promising approaches to passing on the compensation, to banks and sales. Bank liability: Some credit institutes supported the selling with the product sales, be it by sample computations, computation software or by a loan mediator, who appeared on training meetings of the insurance selling. Regularly a dozen central risks are concealed thereby: The crux is that the bank here (also through its independent credit intermediaries !) goes beyond the role as a pure financier, so supports the sale of the KLV as an investment, and thus the bank comes into the liability to the customer and to the sales department. That some mediator was badly trained becomes clear at the latest in the case of loss. The mediator can score points with it later, if it encourages the customer to tackle a back completion opposite the bank – for the loss reduction for customer and mediator understands itself. Liability of sales directors: Sales directors in a structure are in competition: a leverage model helps to multiply the turnover ? without having to acquire significantly more customers. Therefore, sometimes a leverage model is introduced far below the insurance company and then the training of the subordinate directors starts there, down to the intermediary (agent, broker): Usually a vicarious agent (e.g. bank employee, credit intermediary) is involved in the training for the credit institution. The sales company usually only wakes up from its coma when it is accused of not providing its training and the “self-made? Sales documents (incl. software) neither insured, nor qualified examined let. Often the ?sales partner? who carried out the incomplete or dubious training is liable on the one hand ? but also the product provider whose pretty company logo can be seen on the training documents. Mediator complaint: Distribution omits risk references: A first legal examination of training documents and selling software often results in the fact that again and again with concepts (e.g. lever models, before stock exchange shares, quiet and/or closed participation) numerous necessary risk references are missing. For those who find this hard to believe, put it to the test: Compare the training documents and Hochglanzprospekte with the ?principles of proper evaluation of folders over publicly offered investments (IDW S 4)? of Institut of the chartered accoutants. Liability of the selling from folder adhesion: Not the customer can refer in the case of adhesion to incomplete and/or incorrect folders. Also for the mediator there is the aspect that also self-made ! Training and selling documents (on which selling stage they also always may have originated) can lead to a folder adhesion. For the understanding the fact is central that ?folders? can be both the printed materials of the Produktkitgebers, thus also documents from training courses, Powerpoint presentations, EDP sample computations, and in individual cases also handwritten sample computations. In addition to the liability of the ?superior? Sales structure because of incomplete folder data and/or incorrect training courses additionally a possible bank adhesion comes because of co-operation with the selling of the investment into question (see BGH judgement, Az. VII ZR 259/77, and others). Liability of the selling from incorrect selling training: Some mediator contract contains the stupid – because completely ineffective – addition that for errors of the selling and/or with training is not liable. Because the training belongs to the core business: Thus it belongs to the compelling cardinal obligations of the selling company to clear up over all risks, which are connected economically, fiscally and legally with a capital investment model (see BGH judgement, Az. 3 ZR 62/99). The blanket statement of sales companies: “We have examined the investment or the investment model” is frequently encountered. (cf. BGH judgement, Ref. III ZR 268/96). According to constant iurisdiction the selling stands thereby responsibly in the fire. Documentation of the intermediary: The above information shows that it is of central importance if all sales documents, PowerPoint presentations, prospectus materials etc. are centrally archived and kept available. A service, which can become war decisive for the own survival on the market and the economic existence. Claims of the mediator: The mediator can require an assumption of the damage by the selling company and/or the superordinate director in the case of loss regularly in such cases. Many an intermediary is ‘still alive’ precisely because he has shown solidarity with his customer in good time. As far as a customer of the mediator made still no requirements, also a safety contribution would come into question, because finally clings the mediator after ?old? BGB (effective to 31.12.2004) for 30 years, and after ?new? BGB for three and/or 10 years in principle. Accusations of the mediator: With the lever business some mediator will reproach its selling company to have led the customers to the speculation on credit due to selling seminars: In particular, the tax risk, the risk of a foreign currency loan due to currency exchange rate changes, the risk of low or fluctuating earnings, the risk from financing not matching maturities, the risk of changes in credit conditions, the risk of bank claims for reinforcement of collateral are affected. Leverage transactions can also lead to a conviction under criminal law if a leverage transaction is conceived for the purpose of rescheduling or reducing the debt burden of, for example, unsuccessful tax savings models (cf. criminal case judgement, LG München Az. 61 Js 7605/03), but the model ultimately fails. In the concrete case, British life insurance policies had been concluded as repayment vehicles (also for old debts of the customers) on the basis of a loan financing: The loan brokerage commission paid by the customer together with own funds were then mostly lost. Could insurance companies be liable? According to the principles of vicarious liability and prospectus liability, the insurance company could also be liable. If the logo of the insurer is used on (also self-made) sales and/or training documents, then the insurance company has to accept responsibility for the content in case of doubt. Summary: Agents do not always have to go bankrupt themselves in the case of faulty brochures or incorrect training courses due to their own consultant liability. Often bad investments can be literally reorganized over the bank adhesion (e.g. back completion of financed closed real estate participation) and/or the selling and training adhesion. Every intermediary will consider the effort it took to build up a client and how best to retain them.
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About the author
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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