Court of Cassation Sets Conditions for Liability and Compensation in Wealth Management Advice

Five years. This is the time you have, from the day you become aware or should have become aware of facts likely to entail the liability of a trader, to take legal action against him. But when it comes to a wealth management advice (CGP) who gave you bad investment advice on a unit-linked life insurance policy, what date should you remember? That of the subscription of the contract where the CGP is required to inform you of the risks and where you are supposed to have accepted them? Or the date of redemption of the contract, the day when the losses are really realized? In two decisions rendered the same day and published in the Bulletin (which attests to their importance), the Court of Cassation has just specified that the latter solution should be adopted (Cass. com of June 21, 2023, n° 21-19.853 and no. 21-16.716).

A favorable position for savers

In the two cases, which concerned the same CGP, clients had taken out life insurance contracts by first investing in certain units of account, then by arbitrating in favor of other vehicles 4 years later, still on the advice of their CGP. Having suffered significant capital losses, the savers sued the latter for having failed in his obligations to advise and warn and in his duty to ensure the adequacy of the advised supports with the declared risk profile of the investors.

But in both cases, the customers are faced with a rejection from the Grenoble Court of Appeal: their requests are time-barred. According to the magistrates, the plaintiffs were indeed informed as soon as the contracts were concluded that the recommended media involved risks of capital loss. The limitation period for their liability action against this consulting firm therefore began to run on the date of conclusion of these contracts.

Loss of luck

The Court of Cassation, seized by well-informed savers, quashed and canceled the two appeal judgments. It recalls that the lack of information on the risk of losses related to these investments or the lack of advice with regard to such a risk, deprives the subscriber of a chance to avoid the realization of these losses. However, these losses are only realized when the life insurance policy is redeemed (even if the support in question had previously been the subject of a disinvestment, as was the case in the two files). It follows, argues the Court of Cassation, that the 5-year limitation period begins to run, not on the date on which the investment takes place, but on the date of surrender of the life insurance policy. The two cases are sent back to the Court of Appeal of Chambéry to be retried, following the common thread drawn by the senior magistrates.