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Determining Loss Caused by Defective Information in Investment Services

Norros, Olli

JFT 2013/5–6 s. 341
Alkuperäinen julkaisupäivä: 4.3.2014


Firms offering investment services form an indispensable interface between securities markets and retail investors. Purchases from the public secondary market can be made only through licensed stock exchange members who are entitled to engage in public trading. The role of investment firms as an interface between the securities market and retail investors also makes this relation crucial from the viewpoint of investor protection. A retail investor needs comprehensive, balanced and understandable information to be able to assess which of the countless possible investment products would best fit his or her objectives and circumstances. The civil law liability of an investment firm is not regulated by the EU but depends on each individual jurisdiction. In some jurisdictions, there may be special legislation applying to an investment firm’s liability but in some others the question must be assessed applying general provisions for service contracts or non-statutory rules and principles. The truly complicated questions of an investment firm’s liability relate to determining loss. The most fundamental question is what the recoverable economic interest is in a case where an investment firm gives defective information or advice. Another important question is how we define the moment which is critical in damage determination. These questions, among some others, are the subject of this paper. This article covers all situations in which an investment firm is held liable to a customer on the grounds of provision of defective information. In cases where an investment firm has provided the customer with false, misleading or otherwise defective information, the starting-point is that the recoverable loss of the customer is to be determined applying the method of positive interest. This means putting the customer in a position he would have been in had he been provided with appropriate information.


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