Law firm for misadvice (capital investments)

False investment advice: Legal classification and options for action

Incorrect investment advice not only leads to considerable financial losses, but often shakes confidence in banks, financial advisors and other brokers. CDR Legal specializes in representing aggrieved investors and offers you a free initial consultation to review your claims and develop a sensible strategy. Thanks to many years of experience, the CDR Legal team knows how to successfully enforce claims for damages and what options are available to largely compensate for losses.

Anyone investing in capital generally relies on the expertise and diligence of the advisor to be able to comprehensively assess opportunities and risks. However, if incorrect or incomplete information is provided, this can result in far-reaching financial losses. Incorrect information is often the result of gross negligence or even intent. This may, for example, involve concealing material risks, creating unrealistic expectations of returns or failing to take sufficient account of personal needs and investment objectives.

Legal classification and technical explanations

From a legal perspective, liability arising from incorrect investment advice plays a central role in cases of incorrect investment advice. On the basis of statutory regulations (in particular Sections 280, 311 BGB), banks, financial advisors and other intermediaries are obliged to comply with certain duties of care towards their clients. If they fail to do so and investors suffer a loss as a result, they may be liable to pay compensation.

The focus is on two specific aspects:

• Appropriate advice: The advisor must inform the investor about all the opportunities and risks of the specific form of investment. Aspects such as term, costs, possible total loss risks and special tax features should also not be concealed.
• Investor-oriented advice: Every investment recommendation should be based on the investor’s personal goals, risk tolerance and financial circumstances. For example, a high-risk investment does not suit an investor who is looking for a secure retirement provision.

Breaches of duty – such as the concealment of important information or inadequate risk disclosure – often constitute liability-relevant incorrect advice. In such cases, the bank or the advisor may be obliged to compensate for the loss incurred. You can find out in detail which conditions must be met and how you can claim them in this article on the subject of compensation for incorrect advice.

For those affected, the question of proof is particularly important: anyone alleging incorrect advice must prove that the advisor did not disclose all material facts or gave false assurances. It is also crucial to prove that the investor invested in the capital investment precisely because of this false information and suffered losses as a result. For support, it is advisable to keep all documents, e-mails and minutes of meetings carefully so that evidence can be presented in the event of a dispute.

In many cases, the so-called advisory liability also applies. The question here is to what extent an advisor can be held liable for damages if he breaches his duty of care. The relevant legal bases provide for both contractual and tortious claims. A special guide on liability for advice explains in more detail how far the liability for advice extends and what specific steps injured parties should take.

Practical recommendations for action

Anyone who suspects that they have received incorrect advice should take action as soon as possible. This is due in particular to possible limitation periods, which can cause a claim for damages to lapse after a certain period of time. An early legal examination of the situation is therefore of great importance. A structured approach can look like this:

• Collect documents: Keep all documents, contracts, minutes and correspondence relating to the investment.
• Create a memory log: Keep a written record of the content of your conversations and telephone calls with the advisor or intermediary.
• Check legal protection: Ask your legal expenses insurance whether the costs of legal advice or court proceedings will be covered.
• Seek professional advice: Contact a specialist lawyer to assess your chances of success and your options for action.
• Seek an exchange with the advisor: In some cases, an out-of-court settlement can be reached. A lawyer can support you in the negotiations and assert your interests.

A clearly structured approach increases the chance of receiving fair compensation for losses suffered. At CDR Legal, you can request an initial assessment of your claims free of charge and without obligation in order to determine the possible scope of your compensation and to plan the next steps.

Practical examples

Lawyers often encounter similar patterns in their advisory practice when it comes to incorrect advice and investments:

• Inappropriate categorization of the risk class: Particularly risky forms of investment are presented as supposedly safe.
• Unclear information about costs and commissions: Investors only find out about hidden fees after signing the contract.
• Lack of customization of the investment to the customer: The product fits neither the financial situation nor the private investment objectives.
• Incomplete information on the issuer’s creditworthiness: Important warnings are concealed or downplayed.
• Omitted information on the risk of total loss: The risk of total loss of capital is not disclosed.

In many cases, it only becomes apparent that the advice was incomplete or misleading when the return fails to materialize or even substantial losses occur. It is then crucial not to “throw more money after the fact”, but to contact experienced lawyers directly in order to limit further financial damage. It is often worth considering an out-of-court settlement at an early stage if evidence and arguments can be presented conclusively. If it is not possible to reach an agreement, court proceedings must be considered in which the completeness of the advice, the breach of duty of care and the causal damage are examined.

Specialist knowledge is indispensable, especially for complex investments such as closed-end funds, certificates or high-risk investments. Anyone who conclusively demonstrates in a court case that they would not have invested if they had received careful and truthful advice has a good chance of being compensated for at least part of their losses. The assistance of experts, appraisers or witnesses can play an important role here.

How CDR Legal can help you

CDR Legal offers you a free initial assessment to give you clarity about your chances of success and possible next steps. With empathy, competence and transparency, the law firm first examines your individual situation and only accepts cases with a realistic chance of success. Thanks to full cost transparency, you always know what fees you will have to pay. The lawyers bring many years of experience and legal precision to the table and also take care of a free request for cover from your legal expenses insurance. If you choose CDR Legal, you will receive personal and competent representation in all aspects of investment law.