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Clifford Chance

Clifford Chance


BGH: Third pillar of advisor liability

3 May 2016

The 2011 so-called "Ille"-decision of the German Federal Court of Justice (Bundesgerichtshof, BGH) has been the leading case for the liability of banks and other financial institutions regarding swap contracts for about four years. Within the last 12 months, however, the BGH rendered three further swap judgments and elaborated the requirements of advisor liability in more detail.

This newsletter summarizes the new BGH decisions on swaps in a concise manner and puts them into context with the BGH's previous decisions on advisor

  • The BGH is refining integrity-oriented advice as the third pillar of advisor liability
  • Investment advisors are obliged to disclose concealed conflicts of interest
  • Conflicts of interest are
    • concealed commission for the bank providing advice and
    • a concealed initially negative market value of a swap contract from the customer's point of view
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