Finnish bank ordered to reimburse lost funds

[Tiriol]

Meanwhile in Finland: bad marketing and promises gets Nordea Bank in a spot of trouble.

Nordea Bank to reimburse customer for lost funds

The Helsinki District Court has ordered the Nordea Group to reimburse EUR 1 million plus interest to a customer - a married couple who had received insufficient counselling relating to investing in mutual funds.

The Court ruled that the brochures, the terms and conditions of the agreement, and the price list, which the client had been given, were not enough to warn them of potential investment risks linked with an endowment insurance policy.
Dancing masters Åke Blomqvist and Leena Blomqvist are to be repaid the EUR 1 million they lost while keeping their money in mutual funds.

The Blomqvists transferred EUR 2 million from their fixed-term account into Selekta insurances between 1999 and 2000. When this endowment insurance policy expired in the spring of 2005, and it was time to return the money, EUR 1 million had been lost.
The Blomqvists and Nordea both agree that alternative investments were sought for the couple’s non-taxable accounts at the end of 1999. Thereafter the statements are different.
Initially, the negotiations had been conducted between Åke Blomqvist and the bank manager, who had informed him that the Selekta investment policy was the only alternative deposit method available.
According to Nordea, the Blomqvists were looking for an investment that is non-taxable while its expected yield is higher compared with a fixed-term account.

Blomqvist claims that he was not warned of any risks relating to the funds, while he never really understood whether the proposed endowment insurance policy was actually a bank product or an insurance product.
He reported that for tens of years they had simply trusted the bank manager and the bank’s experts, who had tailored the Selekta endowment insurance policy to meet the couple’s requirements.

In Nordea’s view, it was brought home to the Blomqvists that whenever one tries to obtain higher returns the risk of losing assets grows.
Blomqvist insists that their decisions were solely based on the information given by the bank, while the couple could not understand that their investment risks had been increased compared with the earlier investment method.

The District Court sided with the Blomqvists, noting that the Selekta brochures contained only calculations leading to a positive outcome.
”A long-term Selekta investor always wins”, read one of the brochures, despite the fact that ”many people who invested their money through Selekta insurance have been sustaining losses”, the Court argued.

The Court also found that the bank manager had not paid any attention to the possibility of losing assets, which meant that Nordea’s counselling was not in compliance with the Insurance Contracts Act. The Court also pointed out that the bank manager still did not know which legislation is applicable to an endowment insurance policy.
If Nordea intends to apply to the Court of Appeals against the court decision, it has to submit its application by May 23rd.

The decision made by the Helsinki District Court could become a significant precedent, if Nordea wants to proceed to the Court of Appeals or even to the Supreme Court.
Until now all disputes relating to endowment policies have been handled mainly by the Finnish Insurance Complaints Board, which provides recommendations for dispute resolution.

[Darth Wong]

It's tempting to say that this couple should lose their money for stupidity. But if the bank was stupid enough to imply that it was impossible to lose money on their investments and not put a warning on their literature (as all financial institutions do here), then they are guilty of false advertising and should be penalized accordingly.

[Edi]

It's tempting to say that this couple should lose their money for stupidity. But if the bank was stupid enough to imply that it was impossible to lose money on their investments and not put a warning on their literature (as all financial institutions do here), then they are guilty of false advertising and should be penalized accordingly.

Wouldn't surprise me if they had made that mistake or just outright lied about things. The ruling is unusual, but the provisions in the law here allow courts discretion in such cases if it can be adequately demonstrated that the person being taken advantage of was not capable of making an informed decision and was exploited for it. It's more complicated than that, but that's the gist of it.

No matter how this turns out, it's certain that the banks hereabouts are going to make sure they cover their asses better than they have done now.