The English High Court recently heard a case concerning the duties upon banks and financial advisers when they are advising customers to make investments.
The claimants in this case, Mr and Mrs Worthing were customers of Lloyds Bank Plc. The claimants had invested £700,000 in an investment portfolio after having been advised by Lloyds' advisors. The claimants signed standard form terms and conditions and other risk and planning documentation, acknowledging the risk of the investment.
The portfolio underwent a series of initial losses. Despite these losses Lloyds discussed the portfolio with the claimants and advised them to retain the portfolio.
The claimants commenced proceedings, seeking compensation for losses incurred under the portfolio. Due to the expiry of a limitation period, the claimants' allegations were confined to the claim that Lloyds had a duty to correct the advice it had initially given after the initial losses were incurred under the portfolio.
The Judge dismissed the claim, finding that Lloyds had not been negligent in advising the claimants.
First, Lloyds was entitled to use standardised documentation for explaining the nature of its products and associated risks. Secondly, this documentation was sufficient to outline and explain the risks of the investment to the claimants. The Court found that although Lloyds did owe the claimants a duty to exercise reasonable care and skill in relation to the investment, the claimants understood the risks and there had been no change in their attitude to risk, despite the initial losses. The Court held that it was reasonable for Lloyds to give advice that no immediate decision should be made to sell the portfolio and that there was therefore no duty on Lloyds to advise that the portfolio was no longer suitable.
See Court decision here.