Remaining Factors: Limits on the Existence and Extent of Liability of Investment Firms to Compensate for Investment Losses

Abstract

This chapter analyses a number of remaining private law factors that can restrict the existence and the extent of liability to compensate for investment losses. In particular, the chapter analyses whether these factors raise significant obstacles to investors in obtaining redress and how investors might benefit from the MiFID and MiFID II conduct of business rules in clearing those obstacles. Analysed are the category of damage recoverable in contract or in tort, contributory negligence, limitation periods and the duty to protest. The chapters discusses how investors can recover not only investment losses suffered, but also potentially the profits they could have made if the firm had not acted in breach of a duty for which it is held liable. The chapter shows that German law offers a more straightforward way of compensating for investment losses, while investors could be entitled to a higher award of investment profits in Dutch and English law. The chapter also demonstrates that there is generally limited room to reduce the award of damages under contributory negligence on account of the investor’s dependency on the advice provided and the firm’s position of trust in investment advisory relationships. The chapter furthermore analyses how investors can escape the short general limitation period in English law by basing a claim for damages in the tort of negligence under the Latent Damages Act of 1986. In addition, particular attention is paid to the duty for investors to protest which exists alongside limitation periods in Dutch law.