Bank ordered to refund lost investment
Print Edition
A LOCAL bank has been ordered to pay a customer 180,000 yuan (US$29,000) in compensation after being found guilty of mis-selling him an investment product.
The lender, whose name was not disclosed, failed in its duty to recommend a suitable product to the customer, identified only as Hu, Judge Jin Cheng said at Shanghai No. 1 Intermediate People’s Court yesterday.
The ruling overturned the decision of a lower court that deemed Hu was fully aware of the risk at the time of making the investment and had signed a document confirming his understanding of such.
The intermediate court, however, said that the bank had previously evaluated Hu’s tolerance to risk and determined that he favored low-risk investments.
To then sell him a high-risk product was therefore negligent, the judge said.
Hu invested 1 million yuan in the unnamed product in 2011 and lost 180,000 yuan.
The court ruled that the bank was liable for the drop in value, but rejected the plaintiff’s appeal for compensation for unearned interest.
Under Chinese regulations, commercial banks are obliged to evaluate the risk tolerance of all customers interested in investing and to recommend only products that suit their personal profile, the intermediate court said.
“Many people have very little financial knowledge and accept the recommendations of bank workers without question,” Jin said.
“I hope this ruling will serve as a reminder to banks that they have a responsibility to offer only appropriate advice,” the judge said.
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