Court decision backs cheated investors

Germany's Federal Court of Justice (BGH) ruled Tuesday that brokerage firms must be held responsible for investment losses, if they fail to sufficiently advise investors about risky investments.

The ruling applies to investments made through a brokerage's online platform and includes firms headquartered outside Germany, the first such ruling to apply to foreign brokerage firms.

The BGH was specifically ruling in the case of an investor who was demanding about 6,000 euros ($8,200) in compensation from U.S. brokerage Pershing for losses made on the New York Stock Exchange.

The brokerage firm, through a German intermediary, handled the investor's affairs from 2003 to 2005. From an initial sum of 6,000 euros, the brokerage invested in futures and options that the intermediary made through its online service, in particular investments which, according to the court, had no chance from the start.

By the end, the investor was left with only 205.01 euros ($279). According to the BGH, the American firm was also liable, as it clearly knew the investment risks.

However, the firm had failed to check out the German agent's business model or monitor his online investment actions.

The court said this case was just the first of about 40 similar claims.

cmk/apn/dpa/Reuters
Editor: Andreas Illmer