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Wilson and Another v MF Global

Posted on 01/02/2011 · Posted in Financial Litigation

Classification of customers, advice

The Claimants were Mr Wilson, who acted in his personal capacity and as a trustee of a pension scheme, and the co-trustee of that pension scheme.  The Defendant was MF Global with whom the Claimants had execution-only accounts to enable them to make investments.

The Claimants invested in contracts for difference, futures and options amongst other products.  They made substantial losses on their investments and sought damages from the Defendant for misrepresentation, giving negligent advice and for breach of FSA rules.

The Court held that the contractual terms should be applied and this meant that the deals were non-advisory or execution only. It was felt that it would not be fair to pick up on certain observations of the broker and suddenly say that the bank was giving advice and thereby changing terms expressly agreed.

For COB to apply the Claimants sought to show that they had been incorrectly classified as intermediate customers. Under COB it must be asked whether reasonable care had been taken to determine that the clients had sufficient experience and understanding to be classified as an intermediate customer. On the facts the Court felt this had been satisfied as a system of eliciting information from the client and providing warnings had been followed. Moreover assessment took place before the investment.

Link: Wilson and Another v MF Global [2011] EWHC 138 (QB)

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