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In a judgment rendered in October 2011, the Court of Appeal concluded that a contextual analysis was a good method to use in order to measure the intensity of a broker’s obligations towards his clients. According to the Court, the request, by an investor, to be presented with different ways to recover an unrealized loss shows the investor’s impetuous temperament when the market fails to reach his expectations. The broker’s obligations towards such a client must be evaluated in consequence (Immeubles Jacques Robitaille inc. v. Financière Banque Nationale, 2011 QCCA 1952).
The appellant Robitaille began his business relationship with Mr. Coulombe, representative of the the Financière Banque Nationale in 1991. In 1996, Coulombe buys for the appellant four millions American bonds that come to term in 30 years. In the days following their acquisition, the value of the bonds suffer a significant decrease and Robitaille meets Coulombe in order to develop a strategy that can be used to recover any loss. Together, they decide to proceed on purchasing call options on the S&P index. According to Robitaille, Coulombe presented the call option as being without risk. Coulombe instead invokes that he thoroughly explained the functioning of the option agreements on the market to his client, including the possibility of suffering a loss, and that he provided Robitaille with a number of information pamphlets further detailing option agreements.
After everything was said and done, the appellant found himself with a three million dollar loss.
Before the Superior Court, Robitaille argued that Coulombe had failed to respect his obligations of competence, diligence and loyalty by neglecting to give his client all the adequate information regarding option agreements and by advising him to invest in a way that was incompatible with his investing objectives.
The judge decided that Robitaille understood the mechanism of options, a mechanism that responded to his taste for fast gains, and that even though the client file prepared by Coulombe should have better reflected the elevated risk of the investments in question, Robitaille consented to participating in all the stock deals. Consequently, Coulombe satisfied his obligations of prudence and diligence. This decision is brought to appeal by Robitaille.
THE COURT OF APPEAL’S JUDGMENT
After having considered the arguments invoked by the appellant, the Court of Appeal draws the following conclusions:
THE LESSONS TO BE LEARNED