“Speaking from my own experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses' motives, and to the overall probabilities, can be of very great assistance to a Judge in ascertaining the truth.”
“And it is not to be forgotten that, in the present case, the Judge was faced with the task of assessing the evidence of witnesses about telephone conversations which had taken place over five years before. In such a case, memories may very well be unreliable; and it is of crucial importance for the Judge to have regard to the contemporary documents and to the overall probabilities. … That observation [i.e. of Robert Goff LJ] is, in their Lordships' opinion, equally apposite in a case where the evidence of the witnesses is likely to be unreliable; and it is to be remembered that in commercial cases, such as the present, there is usually a substantial body of contemporary documentary evidence.”
“In this regard I would say something about the importance of contemporary documents as a means of getting at the truth, not only of what was going on, but also as to the motivation and state of mind of those concerned. That applies to documents passing between the parties, but with even greater force to a party's internal documents including emails and instant messaging. Those tend to be the documents where a witness's guard is down and their true thoughts are plain to see. Indeed, it has become a commonplace of judgments in commercial cases where there is often extensive disclosure to emphasise the importance of the contemporary documents. Although this cannot be regarded as a rule of law, those documents are generally regarded as far more reliable than the oral evidence of witnesses, still less their demeanour while giving evidence.”
“Judges have for many years remarked on the vulnerabilities of evidence as to what witnesses remember. Popplewell LJ recently discussed human memory and how witnesses can come to give mistaken evidence in his 2023 COMBAR lecture, Judging Truth from Memory: The Science. In Gestmin SGPS SA v Credit Suisse (UK) Ltd[2013] EWHC 3560 (Comm) , [2020] 1 CLC, at paragraph 22, Leggatt J went so far as to suggest that “the best approach for a judge to adopt in the trial of a commercial case is … to place little if any reliance at all on witnesses’ recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts”
“We consider that to have been a serious error in the present case for a number of reasons. First, as has very recently been noted by HHJ Gore QC in CBX v North West Anglia NHS Trust [2019] 7 WLUK 57, Gestmin is not to be taken as laying down any general principle for the assessment of evidence. It is one of a line of distinguished judicial observations that emphasise the fallibility of human memory and the need to assess witness evidence in its proper place alongside contemporaneous documentary evidence and evidence upon which undoubted or probable reliance can be placed. Earlier statements of this kind are discussed by Lord Bingham in his well-known essay The Judge as Juror: The Judicial Determination of Factual Issues (from The Business of Judging, Oxford 2000). But a proper awareness of the fallibility of memory does not relieve judges of the task of making findings of fact based upon all of the evidence. Heuristics or mental short cuts are no substitute for this essential judicial function. In particular, where a party’s sworn evidence is disbelieved, the court must say why that is; it cannot simply ignore the evidence.”
“I also bear in mind that as to inferring fraud or dishonest conduct generally: a. It is not open to the Court to infer dishonesty from facts which are consistent with honesty or negligence, there must be some fact which tilts the balance and justifies an inference of dishonesty, and this fact must be both pleaded and proved: Three Rivers District Council v Bank of England[2001] UKHL 16 ;[2003] 2 AC 1 , [55]-[56] per Lord Hope and [184]-[186] per Lord Millett. b. The requirement for a claimant in proving fraud is that the primary facts proved give rise to an inference of dishonesty or fraud which is more probable than one of innocence or negligence: JSC Bank of Moscow v Kekhman[2015] EWHC 3073 (Comm) at [20] per Bryan J; Surkis & Ors v Poroshenko & Anr[2021] EWHC 2512 (Comm) at [169 (iv)] per Calver J. c. Although not strictly a requirement for such a claim, motive " is a vital ingredient of any rational assessment " of dishonesty: Bank of Toyo-Mitsubishi UFJ Ltd v Baskan Sanayi Ve Pazarlama AS[2009] EWHC 1276 (Ch) at [858] per Briggs J. By and large dishonest people are dishonest for a reason; while establishing a motive for conspiracy is not a legal requirement, the less likely the motive, the less likely the intention to conspire unlawfully: Group Seven Ltd v Nasir[2017] EWHC 2466 (Ch) at [440] per Morgan J. d. Assessing a party's motive to participate in a fraud also requires taking into account the disincentives to participation in the fraud; this includes the disinclination to behave immorally or dishonestly, but also the damage to reputation (both for the individual and, where applicable, the business) and the potential risk to the " liberty of the individuals involved " in case they are found out: Bank of Tokyo-Mitsubishi UFJ Ltd v Baskan Sanayi Ve Pazarlama AS[2009] EWHC 1276 (Ch) at [858], [865] per Briggs J.”
“[it] is well established that ‘cogent evidence is required to justify a finding of fraud or other discreditable conduct’: per Moore-Bick LJ in Jafari-Fini v Skillglass Ltd[2007] EWCA Civ 261 at [73]. This principle reflects the court’s conventional perception that it is generally not likely that people will engage in such conduct: ‘where a claimant seeks to prove a case of dishonesty, its inherent improbability means that, even on the civil burden of proof, the evidence needed to prove it must be all the stronger’, per Rix LJ in Markel International Insurance Company Ltd v Higgins[2009] EWCA Civ 790 at [50]. The question remains one of the balance of probability, although typically, as Ungoed-Thomas J put it in In re Dellow’s Will Trusts[1964] 1 WLR 451 , 455 (cited by Lord Nicholls in In re H[1996] AC 563 , 586H), ‘The more serious the allegation the more cogent the evidence required to overcome the unlikelihood of what is alleged and thus to prove it’. Associated with the seriousness of the allegation is the seriousness of the consequences, or potential consequences, of the proof of the allegation because of the improbability that a person will risk such consequences: see R (N) v Mental Health Review Tribunal (Northern Region)[2005] EWCA Civ 1605 ;[2006] QB 468 , para 62, cited in In re D (Secretary of State for Northern Ireland intervening),[2008] UKHL 33 ;[2008] 1 WLR 1499 , para 27, per Lord Carswell.”
“In general it is legitimate and conventional, and a fair starting point, that fraud and dishonesty are inherently improbable, such that cogent evidence is required for their proof. But that is because, other things being equal, people do not usually act dishonestly, and it can be no more than a starting point. Ultimately, the only question is whether it has been proved that the occurrence of the fact in issue, in this case dishonesty in the realisation of the assets, was more probable than not.”
“The question is really difficult, but my point is, I did what is written in the contract. There is no mention of independence in the contract. So I did, what was written in the contract, which is we support them in the … strategic design of the strategy, in the implementation we supported them, at the end also in the monitoring of the strategy, okay. So we did exactly what was written in the contract”
“I’m aware that the website mentions independence. My understanding of the concept is that consultants should not receive commissions, benefits, or incentives from third parties in relation to the advice provided to clients (which is true as all of the fees from XY are from clients).”
“The question whether an adverse inference may be drawn from the absence of a witness is sometimes treated as a matter governed by legal criteria, for which the decision of the Court of Appeal in Wisniewski v Central Manchester Health Authority [1998] PIQR P324 is often cited as authority. Without intending to disparage the sensible statements made in that case, I think there is a risk of making overly legal and technical what really is or ought to be just a matter of ordinary rationality. So far as possible, tribunals should be free to draw, or to decline to draw, inferences from the facts of the case before them using their common sense without the need to consult law books when doing so. Whether any positive significance should be attached to the fact that a person has not given evidence depends entirely on the context and particular circumstances. Relevant considerations will naturally include such matters as whether the witness was available to give evidence, what relevant evidence it is reasonable to expect that the witness would have been able to give, what other relevant evidence there was bearing on the point(s) on which the witness could potentially have given relevant evidence, and the significance of those points in the context of the case as a whole. All these matters are inter-related and how these and any other relevant considerations should be assessed cannot be encapsulated in a set of legal rules.”
“XY is an international group specialized in strategic consulting and the control of large estates. Acting as a global organization authorized by FCA and FINMA, it addresses the needs of ultra-high net worth families, corporations and public sector treasuries worldwide who seek for unbiased consultancy free from conflict of interest. XY offers focused strategy services aimed at tackling the complexities and paradoxes of today’s financial sector. As a global estate orchestrator and neutral partner to the shareholders of large-scale treasuries and assets, it enhances the experience of clients by offering scientific tools for increased knowledge and control, helping establish methodologies that support instant benchmarking, informed decision-making and risk management. XY brings to fruition an innovative and integrated concept of complete anywhere-anytime status reporting, specifically argued risk assessment, as well as highly customized, fact-based, vendor-independent, strategy consulting. Its unique service-delivery model leverages a proprietary knowledge platform integrating best-in-class technologies and a network of dedicated hubs supported by the company’s regional offices and expert divisions. XY operates in line with the highest quality standards. Authorisations obtained to date include the Swiss Financial Market Supervisory Authority’s FINMA authorization (as affiliated to OAD-FCT), the UK Financial Conduct Authority’s FCA authorization, with European Passport authorizations such as the Ticino Cantonal Authority Fiduciary Authorization, with many more under way. XY is committed to transparency and independence in all aspects of its work in accordance with its Code of Ethics and Framework for working with all players within the financial sector without conflict of interest”
“A NEW SCIENTIFIC APPROACH”
“XY’s methodology leans on the language of numbers and on the simplicity of uncontroverted facts. It enforces objectivity when shareholders monitor the estate, source for advice and form their decisions. XY offers a unified viewpoint, a real-time outline of knowledge and a comprehensive strategic outlook of the estate’s performance, integrating architectural and fiscal considerations, embracing the entire asset base (financial, real estate, valuables, etc.). XY created a common ground for consensus building when the estate is managed by multiple decision makers. The methodology can be transferred to peers and passed on to successors and heirs. It supports a harmonized estate orchestration culture connecting present and future generations in the estate’s ownership.”
“1 An informed decision is a better decision • Information needs to be fact-based, not opinion-based • Information needs to be neutral, not biased • Information needs to be rich 2 Analytical services make information smart • Volumes of data are sourced, qualified and proceed automatically • Relevant data are augmented and made user-friendly • Integrated data present a holistic scenario 3 A scientific method grants peace of mind • Strategic guidelines can be enforced • Automatic alerts lead to swift reaction times • 100% measurements of activities supports certified performance” • Information needs to be fact-based, not opinion-based • Information needs to be neutral, not biased • Information needs to be rich • Volumes of data are sourced, qualified and proceed automatically • Relevant data are augmented and made user-friendly • Integrated data present a holistic scenario • Strategic guidelines can be enforced • Automatic alerts lead to swift reaction times • 100% measurements of activities supports certified performance”
“International Group Specialising in Strategic Consulting and Large Asset Control”
“Absence of conflicts of interest and orientation of service to facts and not opinions”
“Evidence from the Various Meetings”
“I recollect well that Mr Nuzzo updated me that XY was an independent firm”
“Dear Mr. Marco Nuzzo, Re: New Consulting Client We are delighted to accept you as a client and confirm that you have been categorised in accordance with the Financial Conduct Authority's ("FCA") rules (the "Rules"), as a "Professional Client". You are entitled to request a different categorisation, as either a "Retail Client" (to benefit from an increased level of regulatory protection). It should, however, be noted that we are not obliged to accept any such request for re-categorisation and we will not be able to provide you with the services under the consulting contract if you are classified as a Retail Client. By classifying you as a Professional Client, you will not be entitled to certain protections that are afforded to Retail Clients. As a Professional Client, you are considered to be more experienced and knowledgeable when making investments and therefore more able to assess the level of risk involved. Professional Clients are consequently afforded lower regulatory protections that Retail Clients. A summary of the main protections that you will lose by being categorised as a Professional Client is set out below: Loss of Regulatory Protections • Communications, including financial promotions made with Professional Clients are not subject to all of the requirements imposed by the Markets in Financial Instruments Directive (MiFID) on communications with Retail Clients. • Information provisions about XY Hub UK Limited ("XY"), its services, and remuneration that are required with respect to Retail Clients are not all required with respect to Professional Clients. • Professional Clients are not eligible complainants with respect to the Financial Ombudsman Services ("FOS') and access to the FOS will therefore not be extended to Professional Clients. • Pre-requirements for the entry into written basic agreements for designated investment business may not apply to Professional Clients. • If XY makes a personal recommendation to Professional Client in the course of MiFID or equivalent third party business, it is entitled to assume that, in relation to the products, transactions and services for which the Professional Client is so classified, the client has the necessary level of experience and knowledge for the purposes of suitability assessment, and where XY is required to provide suitability reports to a Retail Client, in many cases XY is not required to provide them to a Professional Client. • With respect to non-advised services, XY is not required to request information or adhere to the same procedures when assessing the appropriateness of a given service or product for a Professional Client, and XY may not be required to give warnings to the Professional Client if XY cannot determined appropriateness with respect to a given services or product. • XY may take into consideration the classification of the client in providing information, including product information, to clients. Regulatory Confirmations Under the Rules which implement MiFID, we are required to obtain express consent from you in relation to: • XY Hub UK Limited classifying you as a Professional Client. Please sign and return to us the enclosed copy of this letter to provide the above confirmation. If you have any queries regarding the contents of this letter please contact Daniele Migani who will be happy to assist you. Yours sincerely, Daniele Migani”
“3.G: Under no circumstances shall [XY] be held liable for any loss or damage resulting from the provision of the Services, except in the case of wilful misconduct, fraud or gross negligence. 3.H: In accordance with the rules of the Financial Conduct Authority (the “FCA Rules”), we are required to notify you of your client classification. You will receive the protections afforded by the FCA Rules according to your client classification, as notified to you in the letter to which this Contract is attached; 4.A: The provision of the Services by [XY] will be subject to any limit or restrictions which the Client may specify either in writing or orally, the terms of this Contract and any applicable legal or regulatory requirement in force from time to time; 4.F: The Client shall always have full decision-making and executive authority with regard to all strategic and operational decisions relating to the Service; 10.A: All investment is subject to risk and the degree of risk is a matter of judgment that cannot be accurately pre-determined. The value of investments and the income derived therefrom can go down as well as up and past performance is no guide to the future. The Client is encouraged to review its investment objectives, evaluate its level of risk and exposure to loss on a regular basis.”
“definitely not at that time.”
“Indirect Instruments Burdened by Commissions and Expenses”
“Value that can be created by the transformation of assets”
“Critical Areas in Strategic Asset Structure”
“With the strategic restructuring it is possible to increase the expected yield by decreasing the risks of erosion of assets”
“Distribution of the probability of returns on financial assets”
“Probability of Negative Returns from 49% to 5%”
“with the same risk there, but different yield”
“Transformation Plan and Service Roll-Out”
“Detailed Strategy Definition”, “Deal Arrangement” and “Operational Risk Management”
“Advisory Agreement”
“Service” was defined as consisting of “requirements analysis, operational process set-up and day-by-day management of data for monitoring and reporting relating to the Client’s assets and economic flows”
“If it’s OK for you, just reply OK as usual”
“BACKGROUND TO THE DETAILED STRATEGY • Designed an investment strategy with the goal of directing the achievement of shared goals: - Elimination of operational inefficiencies, with a recurring benefit in excess of 550 K€ per year - Generate a clear and measurable monetary value - Maintaining outstanding loans secured by financial assets • The selected strategy provides flexibility in the selection of financial institutions to be involved; two hypothetical organizational models will be presented: - The first privileges existing relationships - The second introduces elements of innovation aimed at maximising the value that can be generated • Monitoring and reporting technology will be applicable whichever organisational model is chosen” • Designed an investment strategy with the goal of directing the achievement of shared goals: - Elimination of operational inefficiencies, with a recurring benefit in excess of 550 K€ per year - Generate a clear and measurable monetary value - Maintaining outstanding loans secured by financial assets • The selected strategy provides flexibility in the selection of financial institutions to be involved; two hypothetical organizational models will be presented: - The first privileges existing relationships - The second introduces elements of innovation aimed at maximising the value that can be generated • Monitoring and reporting technology will be applicable whichever organisational model is chosen”
“Focus on Insurance Notes” and it is likely that there was a further discussion about this type of structured product at the meeting. Mr Nuzzo’s witness statement suggests that this was indeed discussed at the meeting. Slide 15 repeated the Slide 40 from the September 2016 meeting. Slide 41 gave a different example of a “recent insurance note exploiting opportunistic windows in the commodities market”
“Privileged Conditions Reserved for XY Customers”
“Gil accennato ad una struttura a che abbiamo con comparto lux e a detto sarebbe un sogno (ma io dico da capire la fiscalità)”
“I mentioned to him a structure we have with a lux compartment and he said it would be a dream (but I said we must understand taxation)” [XY translation]. And “He mentioned a structure that we have with the Lux sector and said it would be a dream (but I say we must understand the taxation)”. [Claimants’ translation].”
“• has an SRL [limited company] based in Italy and supported by UBS in which there is approximately€22 M all liquid that he wants to invest. They are not collateralised with anything and maybe tomorrow he could make small entrepreneurial investments of€1 - 2M by pulling Lombard (credit), but not in the short term. The company is in Italy, but he wants to move it abroad, optimising taxation as a non-dom resident. Ideally he would also like to take the company apart, distributing the profit. He wouldn't want to pay any income tax generated from this€22M . He said that he's a reasonable and good family man, this is the family's little treasure. In Italy, he never filed financial statements even if he has to pay a fine for this. Phase 1 invest and Phase 2 evaluate the relocation. They The XY translation was uncertain as to whether this was “They” or “I”
“Following the call on Monday, we inform you that we have already started the dialogue with the institutions and acquired the financial statement information on the SrL. Since the times for architectural evolution will not be immediate, we would immediately proceed with the gradual investment of available liquidity, as per reflections also shared with Dr. Migani. We have already identified some early investment opportunities consistent with safeguards, characterised by very short maturities, high liquidability and target returns in the range of 2%-4%. The opportunities are in line with those we have had the opportunity to share in meetings focused on [your] father's heritage. In this first phase, we would start investing in UBS, waiting to acquire data from other institutions and make more in-depth thoughts on the overall balance of assets. If you agree, we will start routing these transactions, which you will then confirm with the bank. We are obviously available for a quick alignment call if you think it is appropriate.”
“Do speculative things with Lombard if needed”, and “You define strategy based on my objectives”
“Objective to create monetary value net of operating costs > 0.7 M€ per year”
“Investment in Certificates including fixed interest rate involves risks linked to the fluctuation of the market rates which could have negative effect on the value of these Certificates”
“The attention of the investors is drawn to the fact that they could sustain an entire or a partial loss of their investment.”
“Update on Tax Issues”
“Already initiated liquidity investment consistent with shared target strategy”
“Market risk: the product may at any time be subject to significant price movement which may in certain cases lead to the loss of the entire amount invested. Certain products may include embedded leverage, which amplifies the variation, upwards or downwards, in the value of the underlying instrument(s) which may result, in a worst case scenario, in the partial or total loss of the invested amount.”
“Provided that no Stop Loss Event occurs, the note holder will receive on each Coupon Payment Date an amount equal to 2.80 % p.a. paid on the Coupon Payment Date. If a Stop Loss Event occurs, the Coupon amount will accrue only up to but excluding the Stop Loss Event Date”
“Soft Protected: Capital or coupon or both are protected until protection disappears due to the occurrence of a predefined market event”
“Structured note with 60% barrier”
“Completion of Phase 1 with Start Today of High Frequency Price Opportunity Strategy through a Dedicated Compartment”
“Managed Vehicle from VP Fund Solutions (Luxembourg) SA AIFM”
“Amplification of Profitability through Lombard Credit”
“High premium risk instruments and safeguard profile”
“It’s exactly the opposite”: he was not chasing a high risk premium, but rather that it was being explained to him that he was having too high a risk for the premium that he was receiving. It was put to him that it was obvious that he knew that making these investments attracted a reward, but the price for the reward was the risk in the investments. He answered “no”
“He chose VP Bank to be the depositary because it was the partner that, for XY … had been a reliable partner in the past years.”
“probably he didn’t even choose it”
“THE CERTIFICATES MAY REDEEM BELOW PAR AND THE REDEMPTION AMOUNT MAY VARY CONSIDERABLY DUE TO MARKET CONDITIONS AND WILL LIKELY BE VALUED AT A CONSIDERABLE DISCOUNT TO ITS PAR VALUE. ANY AMOUNT SCHEDULED AND DUE UNDER THE TERMS OF THE CERTIFICATES BEARS THE CREDIT RISK OF THE ISSUER … PROSPECTIVE INVESTORS SHOULD HAVE SUFFICIENT KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS TO EVALUATE THE MERITS AND RISKS OF INVESTING IN THE CERTIFICATES AS WELL AS ACCESS TO, AND KNOWLEDGE OF, APPROPRIATE ANALYTICAL TOOLS TO EVALUATE SUCH MERITS AND RISK IN THE CONTEXT OF THEIR FINANCIAL SITUATION.”
“the strategy approach is to hold the instruments to maturity, in each case the issuer is committed to maintaining a secondary market that usually allows LV to be recognized, albeit contained generally between 30 and 50 percent. The secondary market also allows the instrument to be sold before maturity should liquidity be needed. In any case, to allow you to consider pulling any additional debt we have requested confirmation of the specific LTV from UBP based on the termsheets of this ad hoc issue for XY customers. In the event of a barrier event, which is to be considered extreme, the instrument stops with a 10% capital loss for every 1% below the barrier. The probability of the barrier event is lower than that of an Investment Grade bond default and the recovery, in the case of a barrier event, higher than in the case of a bond default.”
“Dear Skew Base Team, I would like to confirm that it is permitted under Luxembourg law to have only one investor per compartment in a reserved alternative investment fund with an umbrella structure. Pursuant to the definition of an alternative investment fund that can be found in the AIFM directive, several investors are required in order to qualify for the status of an alternative investment fund; however, in the present case this is not an issue as we have several investors within the entire umbrella, even if there is only one single investor in some of the compartments.”
“External Memo – Strictly Private and Confidential”
“In case you proceed, we ask that you please confirm that the arrangements have been sent to the Bank”
“Separately, as discussed on Monday please find attached a factsheet on a structured product (18 month Autocallable Yield Note Worst-Of on Eurostoxx 50, S&P 500, Nikkei 225) in euros providing you with a quarterly coupon of 1%. This investment has a continuous barrier at 60% which means that if any of the 3 underlying indices trades below 60% of its initial level your original capital would be at risk.”
“would you be interested in receiving some proposals of ours?”
“YOU SHOULD CONSIDER THIS INVESTMENT IF: •You are looking for an enhanced yield and a conditional protection, based on the expectation of stable Underlyings •You do not want your investment to last more than 18 month(s) •You understand the nature, workings and risks of equity-linked structured products •You do not expect the Underlying Assets to trade below the Barrier Level between the Trade Date and Maturity Date HOW DOES IT WORK? •The note provides a quarterly fixed Coupon of 1% (4% p.a.), if the note has not been auto called on the previous period and irrespective of the development of the Underlying Assets described below AUTOMATIC EARLY REDEMPTION • The note will be early redeemed at 100% plus the pending Coupon if, on any of the predefined observation dates, all the Underlyings close above their predefined Autocall Level REDEMPTION AT MATURITY (if no Early Redemption has occurred) •If none of the Underlying Assets has ever traded below the Barrier Level between Trade Date and Maturity or if none of them close below the Autocall Level at Maturity, the note will be redeemed in cash at 100%, plus the last Coupon. •If at least one of the Underlying Assets has ever traded below the Barrier Level between Trade Date and Maturity Date and any Underlying Asset closes below the Strike Level on Maturity Date, the note will be redeemed at the Final Redemption level (p.2) – delivered in cash – plus the last Coupon.”
“• This investment generates a guaranteed Coupon periodically regardless of how the Underlying performs. The Coupon is paid quarterly •If none of the Underlying Assets below the Barrier Level between Trade Date and Maturity Date, the capital of the note is protected •At maturity this investment outperforms a direct investment in the Underlying Assets if the latter trade sideways and if none of them has traded below the Barrier Level between Trade Date and Maturity Date.”
“• Investing in this note represents a potential loss similar to a direct investment in the Underlying Assets and could thus result in a total loss of the invested capital. If the final level of an Underlying Asset on Maturity Date is zero you will lose your invested capital. •You are fully exposed to the Default Risk of the Issuer (see section “General Risks” on the next page). In the worst case-scenario, a default of the Issuer can lead to the loss of the entire invested capital •You are aware that if at least one underlying closes below the respective barrier level between the Trade Date and the Maturity Date, the capital is at risk. You may lose some or all of the invested capital as you are fully exposed to any decline in the level of the worst performing underlying. You will not receive the benefit of dividends or other income that may be paid on the underlying • The lead manager intends, but is not obliged, to provide a daily (off-exchange) secondary market under normal market conditions. The assessment of normal market conditions and the provision of a secondary market are at the issuer/lead manager’s discretion or follow the rules of the exchange where listed, in case of listed notes. By selling in the secondary market you may receive less than the capital invested.”
“Update on major worksites”
“Creation of Clean Capital from personal assets currently at UBS”; “Transfer of personal and corporate assets to new accounts at LGT”; “Liquidity Extraction from SrL”
“High Frequency Price Opportunity Strategy Initiation via Dedicated RAIF Fund”
“High Frequency Strategy Can Be Initiated Immediately Price Opportunity Through Dedicated Fund”
“A. I/We acknowledge receipt of the current Offering Document, Articles of Incorporation and of the latest available annual report of the Fund, which I/we have carefully considered in advance of this application noting especially the Investment Policy and the risk factors relating thereto. I/We hereby confirm that I/we understand and accept that this application is made solely on and in full compliance with the terms thereof.”
“Declaration and Signature”
“These Notes provide the Note Holders with exposure to the Underlying (specified below) which by its nature should be viewed as involving a high degree of risk and should be regarded as speculative and as such should only be considered by persons who can afford such a loss. The Note Holder's profit potential is limited to the coupon payment. The Note Holder may lose all of the investment as they are fully exposed to the performance of the Underlying, in particular, all the investment could be lost following a Barrier Event (specified below).”
“Underlying trades sideways to slightly higher. The Barrier Event will not occur”
“This Product offers the investor a periodic opportunity to receive a Conditional Coupon Amount. In addition, the Product can also be early redeemed, if the relevant conditions are met on any of the pre-defined Autocall Observation Dates. If no Early Redemption and no Barrier Event have occurred, the Investor will receive on the Redemption Date a Cash Settlement equal to the Denomination. If a Barrier Event has occurred, the redemption of the Product will depend on the value of the Underlying, as described in section “Redemption”.”
“It is very important to me that they are involved and that they then know that the choice is made based on the conditions presented to us. Do your three suggested products have returns of 2.43% / 2.86% / 2.7% net of fees? Can you clarify exactly how much our loss would be assuming the Nikkei loses 17% in a day? Can you clarify exactly how much our loss would be assuming the Eurostoxx loses 15% in a day? Can you clarify exactly how much our loss would be assuming the MSCI loses 15% in a day? Can you also confirm how much the lending value of the products indicated is? A quick note here to also remind you to send me the policy transfer instructions”
“The Securities are senior, unsecured obligations of the Issuer and all payments, including the repayment of principal, are subject to the credit risk of the Issuer and the Guarantor. The Securities are not principal protected. The Securities are issued in EUR and pay a pre-defined cash coupon on the relevant Interest Payment Date(s). The Securities are designed for investors who do not believe the NKY will suffer a one day fall of more than 15% over the product's lifetime. If no Trigger Event occurred the note will redeem at 100% and a coupon of 2.43% paid at maturity. If a Trigger Event occurs the investor loses 100%-(15 x (Underlying one day fall -15%)), floored at zero, paid at maturity.”
“In 2018 Machine Fully Operational Thanks to Numerous Interventions in 2017”
“Very Significant Premiums can be Obtained through a HFPO Strategy”
“With the Same Risk, Insurance Notes Offer Superior Yield Compared to Market Bonds”
“Possible diversification of investment in insurance notes and use of implicit leverage”
“Risk of leverage totally related to the vehicle”
“… and High Diversification of Underlyings”
“I was the creator of this opportunity and the owner of the General Partner of the Fund was the same as XY”
“I need to know what I am buying. Can you give me the description of the product”
“Working Hypothesis for the Design of the Strategy”, followed by: “To be finalised together during the meeting”
“Exclusive Access Vehicles (VP Fund Solutions)”
“In fact you can even tell him that RAIF costs are so low because inside our fees is all the reporting, strategic guidelines and operational risk management that we do and that is fundamental to the results … everything that remains inside RAIF are audit structure costs, AIFM bank managers, etc.”
“otherwise, I don’t understand why he should ask: are the RAIF costs included into your fees, which are XY fees”
“I told Mr Nuzzo that XY was doing a job and the RAIF was doing a different job, so there was no reason at all why the fees should be included, the RAIF fees, into XY fees, okay. But I also said, look, remember that the costs or the fees of the RAIF are competitive, and they actually were competitive, but for MIN compartment, the fees were 0.6%, which is, I would say, pretty low for a mutual fund. I said: please remember that the fees are competitive because this is a structure that Mr Migani had set up specifically for XY’s clients, so he tried to be as competitive as possible to the fees. That is what I said to Mr Nuzzo.”
“Detailed Strategy Definition; Deal Arrangement; Operational Risk Management”
“XY SA is an international group specialising in strategic consulting and management control for U-HNWIs. XY SA is authorised and regulated by the Financial Conduct Authority (FCA) in the UK - authorisation no. 604661 - to carry out 'investment advisor and arranger' activities with a European passport to operate in the countries of the European Economic Area. In Switzerland, XY SA is supervised by the self-regulation body OAD FCT, recognised by the Federal Financial Market Supervisory Authority (FINMA). XY SA has achieved ISO 9001:2015 quality certification, through SQS and IQnet - Certificate No. 43937. XY hereby certifies that the investment strategy is consistent with the objectives expressed by the Client and that all selected counterparties have passed thorough due diligence and operate under a competitive cost regime.”
“New Liquidity Investment Strategy”
“Exposure to patent cases of conflict of interest and lack of transparency leads him to understand the industry’s deep-rooted contradictions”
“Limit any possible risk of erosion of assets to a minimum”
“Distribution Rules”
“The securities have no capital protection at any time and there can be a partial or total loss of any capital invested. Investment in the Securities is therefore highly speculative and should only be considered by persons who can afford to lose their entire investment.”
“What we can do is to try to delete the performance fees of the Skew Base Fund, but we will need to get the approval from Skew Base”
“The Compartment may use leverage to enhance the return of the strategy. The maximum allowed leverage is 400% under both the gross exposure and commitment approach”
“Critical ongoing monitoring and ongoing maintenance of the investment portfolio to ensure the achievement of the economic objectives shared with the family (return 2.5%/year corresponding to€ 5m )”
“what we need to do with regard to what they are requesting”
“I don't share your opinion. Skewbase is extremely aggressive and prescribes tail risks without end, their opinion can only be: nothing will happen, so it's not interesting. Our credit department doesn't understand the risk at all and doesn't analyse the portfolio properly. If something happens and a major credit default is the result, VPFS will be pilloried and we will be killed. I can just about understand buying knock-out certificates, but leveraging them is irresponsible. In my ten years as a trader, I have seen many go under with this strategy.... I guarantee you that the Skewbase investors are not aware of the strategy being pursued here.”
“I need to have the Realization Price of these products which clearly cannot be calculated as a discount on the MTH value as shown in the table but will possibly be a discount on the MTM value and in the case of the Market insurance note and HFPO funds there must be no discount but will simply be the net asset value calculated as of the valuation date. I am waiting to receive The details of the funds.”
“Mi avete sempre detto che i fondi li controllate voi quindi non è possibile che non abbiate questi dettagli”
“In light of today’s results, I need to have the exact details of the products contained with the Market Insurance Notes and HFPO funds. I need to be able to understand where events have already occurred (see today’s Eurostoxx results) and therefore the losses that have crystallised and where else we are at risk. You have always told me that you control the funds, which means that it is impossible that you do not have these details, as such, please send them to me by tomorrow morning so that we can analyse matters completely.”
“In the event that, as I hope given today’s performance of the Euro Stoxx 50, the preservation of invested capital is restored, how is it possible to dismantle the credit mechanism Lombard as an amplifier of returns to extricate itself from the bank’s perverse conflict mechanism to my detriment that to save its 4 min of Lombard sells at the expense of my 10 min? That is, in the face of a careful assessment about the chances of recovery we leave the money in the HFPO but without the associated HFPO Lombard”
“The Covid-19 Crisis, one of the most significant global public health crises in the last 100 years, has disrupted global economic activity and causes major disruptions and unprecedented volatility in financial markets. We just witnessed a global collapse in asset prices the likes we haven't seen before, not even in 2008 or 2000. The stock market downturn began on20 February 2020 , markets over the following weeks became extremely volatile and VIX spiked reaching its record highs in history. The markets crashed all around the world on Monday9 March 2020 (the "Black Monday"), mainly due to the combination of two aspects, on one hand the Covid-19 pandemic and the other hand the Russia-Saudi Arabia oil price war, being at that time the worst drop since the Great Recession in 2008. Subsequent significant drop was registered three days after the Black Monday. On12 March 2020 (the "Black Thursday"), the stocks across Europe and North America fell more than 9%. Wall Street experienced its largest single-day percentage drop since the Black Monday in 1987, the FTSE MIB of the Borsa Italiana fell nearly 17%, becoming the worst-hit market during Black Thursday and Eurostoxx 50 fell more than 12% (first time ever EuroStoxx 50 lost more than 10% in one day and lost almost 40% in less than a month). Four days later, on16 March 2020 , all three main Wall Street indexes fell more than 12% (it took the S&P 500 only six sessions to fall into correction territory, the fastest downfall in history). Although all Central banks unleashed a massive QE5, rate-cut and swap-line, the market didn't seem to be reassured by these measures, continuing the panic selling. The Compartment invested in listed structured products such as bonus certificates, bonus cap certificates, reverse bonus certificates, reverse bonus cap certificates, discount certificates, reverse convertibles, investment certificates and other similar investment certificates with a maximum residual maturity of 12 months. The underlying assets of each certificate may be equity indices (including but not limited to specific sectors and countries), commodities, single stocks or any combination of the above. The maximum potential loss of any certificate cannot exceed the amount paid to purchase the certificate. The Compartment may use leverage to enhance the return of the strategy. The value of investments held by a Compartment may decline in value due to factors affecting financial markets generally, such as real or perceived adverse economic conditions, changes in the general outlook for revenues or corporate earnings, changes in interest or currency rates, or adverse investor sentiment generally. The level of collateral required for financial derivatives transactions is determined taking into account factors including the nature and characteristics of transactions, the creditworthiness and identity of counterparties and prevailing market conditions. Given the exceptional distress in the markets, the value of collateral present in the Compartment declined due to exceptional adverse market conditions resulting in a collateral shortfall in the Compartment (the "Collateral Shortfall"). Liquidity refers to the speed, extend and ease with which investments can be sold or liquidated or a position closed. On the asset side, liquidity risk refers to the inability of a Compartment to dispose of investments at a price equal or close to their estimated value within a reasonable period of time. On the liability side, liquidity risk refers to the inability of a Compartment to raise sufficient cash to meet a Collateral Shortfall due to its inability to dispose of investments. In the above mentioned extremely distressed circumstances, investments became less liquid or illiquid due to a variety of factors including adverse conditions affecting a particular issuer, counterparty, or the market generally, and legal, regulatory or contractual restrictions on the sale of certain instruments. In addition, the Compartment invested in financial instruments traded over-the-counter or OTC, which generally tend to be less liquid than instruments that are listed and traded on exchanges. Market quotations for less liquid or illiquid instruments also became more volatile than for liquid instruments and/or subject to larger spreads between bid and ask prices. Difficulties in disposing of investments resulted in a loss for a Compartment and compromised the ability of the Compartment to meet a Collateral Shortfall due to the fact that it may only be executed once (i) sufficient assets of the concerned Compartment are sold on the secondary market or (ii) a sufficient amount of underlying assets of the Compartment has reached its term and the relevant liquidation proceeds have been disbursed to the Fund. As a result of the above exceptional circumstances, the General Partner, in consideration of the advice provided by the AIFM, had to acknowledge that the Compartment would not be able to rectify the Collateral Shortfall and consequently decided together with the AIFM to liquidate the positions of the Compartment, to compulsorily redeem all shares of the Compartment and to terminate and liquidate the Compartment.”
“To date more than two months after the default events related to the market insurance notes we still have no news as to when we will be able to re-enter the cash left, nor have we received the calculation of the NAV. For HFPO as well as knowing that capital has been completely lost, we have not received any information. As requested multiple times, I need to have a detail of the investments made by the fund and how we have fully lost capital. For the tangible credit fund, I would like to have the NAV calculated on 15/04 and I would also like to have an idea of when we can regain cash. For the Real Estate fund I would like to have the exact detail of the underlying investments. Please do not continue to answer me that you did not have them because otherwise it means that until now you have not checked what funds were doing while you have always told us that you actively managed the funds and had “manical” control of what was happening. Please also note that the equity data in 2020 have never been entered even though you have already received the data in March.”
“Please do not continue to answer me that you did not have them because otherwise it means that until now you have not carried out any check over checked what the funds did were doing while you have always told us that you actively managed the funds and had “manical” control an “extremely thorough” check of what went on was happening. Please also note that the equity financial data in 2020 have never been entered even though you have already received the data in March.”
“My requests are aimed at trying to understand how it is possible that tools that in our meetings and presentations have always been compared to government bonds as a degree of risk (in many cases even better) have lost 100% of the capital. The shared strategy has always had as its first objective to preserve capital, which, on the other hand, has not happened at all and above all, while you said that you have manic control of everything that was done now it seems impossible to have certain information. In this regard, please find attached the email received from VP Bank, which tells me that some requested information is confidential! But are we joking? After you have lost€40M any customer has the right to know exactly what happened, so please manage the matter directly with VP Bank. Among other things, when we subscribed to the funds we had discussed that the possibility of 400% leverage was too high and you had made me the attached letter that was not absolutely respected, I would like to understand why.”
“actively managed the funds” (or “gestivate attivamente I fondi” in Italian). In his evidence, Mr Nuzzo sought to distance himself from the use of this expression, or to downplay it. He said in cross-examination by Mr Cloherty that this was the wrong wording. In cross-examination by Mr Weekes, he said that he did not understand XY to be involved in the administration of the Skew Base Fund or its management; that they were not involved in managing the investments either inside or outside the Skew Base Fund, and were not involved in the administration of the investments in the Fund. He said that the relevant paragraph of his April e-mail was not dealing with two different things: i.e. active management and “controllo”
“My point is, you were supposed to monitor these investments every single day and make sure that everything was going in the right direction. And thanks to the technological platform, because this is what they were … saying all the time, it should be able to tell me if the market is going bad, so I can sell my investments.”
“The present Offering Document sets out information about Skew Base Investments SCA RAIF that a potential investor should take into consideration before investing in the Fund. It should be retained for future reference. The Fund is an investment company with variable share capital — reserved alternative investment fund (société d'investissement à capital variable —fonds d'investissement alternatif résérve) incorporated in the form of a partnership limited by shares (société en commandite par actions) under the laws of Luxembourg. It qualifies as an alternative investment fund (AIF) within the meaning of the AIFMD. As a consequence, it needs to appoint an external AIFM within the meaning of the Law of 2013. The Fund is subject to the Law of 2016, as amended from time to time. … The Fund is a single legal entity, set up as an umbrella fund with one or several separate Compartments. Therefore, shares in the Fund are always issued as shares in a specific Compartment. The Fund may issue Shares of different Share Classes in each Compartment. Such Share Classes may each have specific characteristics. Certain Share Classes may be reserved to certain categories of investors. Investors should refer to the relevant Appendix for further information on characteristics of Share Classes. The Fund is managed by Skew Base S.a r.1., a private limited liability company (société à responsabilité limitée) incorporated and existing under Luxembourg law, having it registered office at 6, rue Adolphe, L-1116 Luxembourg, Grand Duchy of Luxembourg and registered with the Luxembourg Trade and Companies Registry under number B 211370 (the "General Partner"). … No distributor, agent, salesman or other person has been authorised to provide any information or to make any representation other than those contained in the Offering Document and in the documents referred to herein in connection with the offer of Shares and, if given or made, such information or representation must not be relied upon as having been authorised. The General Partner has taken all reasonable care to ensure that the facts stated herein are true and accurate in all material respects and that there are no material facts the omission of which would make misleading any statement herein, whether of fact or opinion. The General Partner accepts responsibility accordingly. The Fund expressly disclaims any and all liability based on such information, errors in such information, or omissions from such information. In particular, no representation or warranty is given as to the accuracy of any financial information contained in this Offering Document or as to the achievement or reasonableness of any forecasts, projections, management targets, prospects or returns. The recipient shall be entitled to rely solely on any representations and warranties made to him by the Fund in any subscription or commitment agreement for Shares entered into with the Fund. … An investment in the Shares is only suitable for investors who have sufficient experience, knowledge and/or access to professional advisors to make their own financial, legal, tax and accounting evaluation of the risks of an investment in the Shares and who have sufficient resources to be able to bear any losses that may result from an investment in the Shares. Investors should not treat the content of this Offering Document as advice relating to legal, taxation or investment matters and are advised to consult their own professional advisors concerning the acquisition, holding or disposal of an investment in the Fund referred to in this Offering Document. Accordingly, any investor should consider his own personal circumstances and seek additional advice from his financial advisor or other professional advisors as to possible financial, legal, tax and accounting consequences which he might encounter under the laws of the countries of their citizenship, residence, or domicile and which might be relevant to the subscription, purchase, holding, redemption, conversion or disposal of the Shares. The Shares are reserved to Eligible Investors, as further described in section 7.3 (Eligible Investors) of this Offering Document. Eligible Investors include well-informed investors (investisseurs avertis) within the meaning of article 2 (1) of the Law of 2016. For further details please refer to the definitions "Eligible Investors" and "Well-Informed Investor" set out in section 3 Definitions) as well as to section 7.3 (Eligible Investors) of this Offering Document. … The General Partner is ultimately responsible for verifying each investor's eligibility as a Well- Informed Investor. THE VALUE OF THE SHARES MAY FALL AS WELL AS RISE AND AN INVESTOR MAY NOT GET BACK THE AMOUNT INITIALLY INVESTED. INVESTING IN THE FUND INVOLVES RISK INCLUDING THE POSSIBLE LOSS OF CAPITAL.”
“Investment Management Agreement the agreement entered into between the AIFM and the Investment Manager governing the appointment of the Investment Manager, as may be amended from time to time. Investment Manager the delegate investment manager appointed by the AIFM with the consent of the Fund in accordance with the provisions of the Law of 2016 and the Investment Management Agreement. Investment Manager Fee the fee payable by the AIFM to the Investment Manager under the Investment Management Agreement, as described in section 9.4 (Investment Manager and Investment Advisor Fee) of this Offering Document.”
“4.1 Investment strategy The General Partner has determined the investment objective and investment policy of each of the Compartments as described in the Appendices to this Offering Document. The General Partner may impose further investment restrictions or guidelines in respect of any Compartment from time to time. No assurance can be given that the investment objective of any Compartment will be attained. The pursuit of any Compartment's investment objective and investment policy must be in compliance with the limits and restrictions set out in section 4.2 (Investment restrictions) below and the section "Investment policy and specific restrictions" in the relevant Appendix. In case of discrepancies, the rules and limits of the relevant Appendix shall prevail.”
“a) A Compartment shall not invest more than 30% of its net assets … in securities of the same type issued by the same issuer …. c) When using financial derivative instruments, a Compartment must ensure, via appropriate diversification of the underlying assets, a similar level of risk-spreading. Similarly, the counterparty risk in an over-the-counter (OTC) transaction must, where applicable, be limited having regard to the quality and qualification of the counterparty.”
“4.3 Borrowing Each Compartment may borrow within the limits further described in the relevant Appendix. Unless otherwise stated in the relevant Appendix, each Compartment may borrow for investment purposes as well as bridge financing and to fund expense disbursements when liquid funds are not readily available. The assets of a Compartment may be charged as security for any such borrowings.”
“The performance of the Shares depends on the performance of the investments of the Compartment, which may increase or decrease in value. The past performance of the Shares is not an assurance or guarantee of future performance. The value of the Shares at any time could be significantly lower than the initial investment and investors may lose a portion or even the entire amount originally invested and understand that there is no recourse other than to the assets of the relevant Compartment. Investment objectives express an intended result only. Unless otherwise specified in the relevant Appendix, the Shares do not include any element of capital protection and the Fund gives no assurance or guarantee to any investors as to the performance of the Shares. Depending on market conditions and a variety of other factors outside the control of the Fund, investment objectives may become more difficult or even impossible to achieve. The Fund gives no assurance or guarantee to any investors as to as to the likelihood of achieving the investment objective of a Compartment. An investment in the Shares is only suitable for investors who have sufficient knowledge, experience and/or access to professional advisors to make their own financial, legal, tax and accounting evaluation of the risks of an investment in the Shares and who have sufficient resources to be able to bear any losses that may result from an investment in the Shares. Investors should consider their own personal circumstances and seek additional advice from their financial advisor or other professional advisor as to possible financial, legal, tax and accounting consequences which they might encounter under the laws of the countries of their citizenship, residence, or domicile and which might be relevant to the subscription, purchase, holding, redemption, conversion or disposal of the Shares of the Fund. Investors should also carefully consider all of the information set out in this Offering Document and the Appendix of the Compartment before making an investment decision with respect to Shares of any Compartment or Share Class. The following sections are of general nature and describe certain risks that are generally relevant to an investment in Shares of any Compartment or Share Class. Other risks may be described in the Appendix. This section and the Appendices do not purport to be a complete explanation of all risks involved in an investment in the Shares of any Compartment or Share Class and other risks may also be or become relevant from time to time.” 5.1 Market risk Market risk is understood as the risk of loss for a Compartment resulting from fluctuation in the market value of positions in its portfolio attributable to changes in market variables, such as general economic conditions, interest rates, foreign exchange rates, or the creditworthiness of the issuer of a financial instrument. This is a general risk that applies to all investments, meaning that the value of a particular investment may go down as well as up in response to changes in market variables. Although it is intended that each Compartment will be diversified with a view to reducing market risk, the investments of a Compartment will remain subject to fluctuations in market variables and the risks inherent in investing in financial markets. … 5.2.1 Volatility risk The volatility of a financial instrument is a measure of the variations in the price of that instrument over time. A higher volatility means that the price of the instrument can change significantly over a short time period in either direction. Each Compartment may make investments in instruments or markets that are likely to experience high levels of volatility. This may cause the Net Asset Value per Share to experience significant increases or decreases in value over short periods of time. 5.3 Liquidity risk Liquidity refers to the speed and ease with which investments can be sold or liquidated or a position closed. On the asset side, liquidity risk refers to the inability of a Compartment to dispose of investments at a price equal or close to their estimated value within a reasonable period of time. On the liability side, liquidity risk refers to the inability of a Compartment to raise sufficient cash to meet a redemption request due to its inability to dispose of investments. In certain circumstances, investments may become less liquid or illiquid due to a variety of factors including adverse conditions affecting a particular issuer, counterparty, or the market generally, and legal, regulatory or contractual restrictions on the sale of certain instruments. In addition, a Compartment may invest in financial instruments traded over-the-counter or OTC, which generally tend to be less liquid than instruments that are listed and traded on exchanges. Market quotations for less liquid or illiquid instruments may be more volatile than for liquid instruments and/or subject to larger spreads between bid and ask prices. Difficulties in disposing of investments may result in a loss for a Compartment and/or compromise the ability of the Compartment to meet a redemption request due to the fact that the redemption request may only be executed once (i) sufficient assets of the concerned Compartment are sold on the secondary market or (ii) a sufficient amount of underlying assets of the Compartment has reached its term and the relevant liquidation proceeds have been disbursed to the Fund. The payment of the redemption request may be (considerably) deferred since the General Partner may, at its discretion, defer payment of the redemption of Shares if raising funds to pay such a redemption would, in its view, not be in the best interests of the relevant Compartment. 5.3.1 Economic risk The value of investments held by a Compartment may decline in value due to factors affecting financial markets generally, such as real or perceived adverse economic conditions, changes in the general outlook for revenues or corporate earnings, changes in interest or currency rates, or adverse investor sentiment generally. The value of investments may also decline due to factors affecting a particular, industry, area or sector, such as changes in production costs and competitive conditions. During a general downturn in the economy, multiple asset classes may decline in value simultaneously. Economic downturn can be difficult to predict. When the economy performs well, there can be no assurance that investments held by a Compartment will benefit from the advance. … 5.4 Operational risk Operational risk means the risk of loss for the Fund resulting from inadequate internal processes and failures in relation to people and systems of the Fund, the AIFM and/or its agents and service providers, or from external events, and includes legal and documentation risk and risk resulting from the trading, settlement and valuation procedures operated on behalf of the Fund. … 5.4.2 Structured products risk The term structured product encompasses a broad scope of different structuring possibilities, so that different types of risks can apply. Given that structured products are often unsecured and are only backed by the credit of the issuer, they are subject to credit risk of the issuer. As consequence, investments in structured products may yield in significant losses, including total loss. Furthermore, there is normally no deep market for structured products, so that they might be subject to the liquidity risk. Consequently, it might be difficult to sell the structured product even in the normal market environment or only possible at a significant discount. In addition, the structured products may be highly customised. Accordingly, particular attention shall be paid to whether the envisaged structured product is eligible for an investment and suits the fund's investment objective and investment policy appropriately. The structured products may also tend to have a very complex and in transparent structure. … 5.4.8 Reliance on management A Compartment may depend significantly on the efforts and abilities of the General Partner, the Investment Manager or the Investment Advisor. The loss of such entity's services could have a materially adverse effect on the Fund and on the relevant Compartment. … 5.5.4 Indebtedness When a Compartment is subject to the risks associated with debt financing, it is subject to the risks that available funds will be insufficient to meet required payments and the risk that existing indebtedness will not be refinanced or that the terms of such refinancing will not be as favorable as the terms of existing indebtedness.”
“The Fund has elected to be treated as an externally-managed AIF within the meaning of the AIFM Law. The General Partner has appointed VP Fund Solutions (Luxembourg) S.A. as external alternative investment manager within the meaning of the AIFMD and AIFM Law (the “AIFM”)”
“General Partner Share”, and “Limited Partner Shares”
“6.2 General Partner Skew Base S. à r.1., a Luxembourg private limited company ("sociète à responsabilité limitée") is the General Partner, acting as unlimited partner ("associè commandite") for the Fund and in charge of the Fund's management. The General Partner shall have the broadest powers to act in any circumstances on behalf of the Partnership, subject to the powers expressly assigned by law to the general meetings of Shareholders. The General Partner is responsible, while observing the principle of risk diversification, for laying down the investment policy of the Compartments and for monitoring the business activity of the Fund and its Compartments. It may carry out all acts of management and administration on behalf of the Fund and its Compartments and in particular purchase, sell, subscribe or exchange any securities and exercise all rights directly or indirectly attached to the Compartments.”
“The Fund has appointed the AIFM as its external alternative investment fund manager in accordance with the provisions of the law of 2016 and the law of 2013 pursuant to the management agreement, to perform the portfolio management, the risk management and the valuation function of the fund. the AIFM may, upon instruction of the company, delegate the performance of the operations involving, inter alia, (i) the performance of the valuation function to external valuer(s), (ii) the day-to-day investment management of all or part of the portfolio of one or several compartment of the company to one or more portfolio manager(s), as further detailed in the relevant special section. The AIFM is a public limited company (société anonyme) incorporated under the laws of Luxembourg on28 January 1993 . The AIFM is authorised and regulated by the CSSF in Luxembourg under Luxembourg law. the AIFM is an affiliated company of VP bank group. Its main business activity is to fulfil the functions of AIFM for the fund and other funds as required under the AIFMD and to provide investment management expertise. The relationship between the fund and the AIFM is subject to the terms of the management agreement. Under the terms of the management agreement, the AIFM is responsible for the portfolio and risk management of the Fund, subject to the overall supervision of the General Partner. This includes in particular the monitoring of the investment policy, investment strategies and performance, as well as risk management, liquidity management, management of conflicts of interest, supervision of delegates, financial control, internal audit, complaints handling, recordkeeping and reporting. The AIFM has authority to act on behalf of the Fund within its function. … For the purpose of a more efficient conduct of its business, the AIFM may delegate to third parties the power to carry out some of its functions on its behalf, subject to limitations and requirements, including the existence of objective reasons, in accordance with applicable laws and regulations. The delegated functions shall remain under the supervision and responsibility of the AIFM and the delegation shall not prevent the AIFM from acting, or the Fund from being managed, in the best interests of the investors. The delegation to third parties is subject to the prior approval of the CSSF. … 6.3.1 Risk management function The AIFM employs an appropriate risk management system consisting of mainly two elements: (i) an organisational element in which the permanent risk management function plays a central role, and (ii) a procedural element documented in the risk management policy, which sets out measures and procedures employed to measure and manage risks, the safeguards for independent performance of the risk management function, the techniques used to manage risks and the details of the allocation of responsibilities within the AIFM for risk management and operating procedures. The central task of the risk management function of the AIFM is the implementation of effective risk management procedures in order to identify, measure, manage, and monitor on an ongoing basis all risks to which the or each Compartment is or may be exposed. In addition, the risk management function of the AIFM shall ensure that the risk profile of each Compartment as disclosed in this Offering Document is consistent with the risk limits as defined by the AIFM in compliance with the risk profile as approved by the General Partner. … 6.3.2 Leverage monitoring Furthermore, the risk management function of the AIFM is responsible for regularly monitoring the leverage exposure for each Compartment. Under the AIFM Laws and Regulations, the term leverage is defined as being any method by which the AIFM increases the exposure of a Compartment whether through borrowing of cash or securities, leverage embedded in derivative positions or by any other means. Any leverage potentially creates risks for the relevant Compartment. A leverage (as defined by the AIFMD) of 100% means a leverage-free portfolio. … 6.4 Delegate Investment Manager With the consent of the Fund and under its supervision and responsibility, the AIFM may appoint a delegate investment manager for a specific Compartment, as specified in the relevant Compartment's Appendix. 6.5 Depositary The Fund has appointed VP Bank (Luxembourg) SA as its Depositary within the meaning of the Law of 2016 and Law of 2013 pursuant to the Depositary Agreement. VP Bank (Luxembourg) SA is in charge of (i) the safekeeping of the assets of the Fund (ii) the cash monitoring, (iii) the oversight functions and (iv) such other services as agreed from time to time and reflected in the Depositary Agreement and entered into for such purposes by the Fund and VP Bank (Luxembourg) SA. … 6.5.1 Duties of the Depositary The Depositary is entrusted with the safekeeping of the Fund's assets. … 6.6 Administrator The Fund has appointed VP Fund Solutions (Luxembourg) SA as administrative, registrar and transfer agent and as domiciliary agent of the Fund (the "Administrator") pursuant to the Administration Agreement. The relationship between the Fund and the Administrator is subject to the terms of the Administration Agreement. Under the terms of the Administration Agreement, the Administrator will carry out all general administrative duties related to the administration of the Fund required by Luxembourg law, calculate the Net Asset Value per Share, maintain the accounting records of the Fund, as well as process all subscriptions, redemptions, conversions, and transfers of Shares, and register these transactions in the register of Shareholders. In addition, as registrar and transfer agent of the Fund, the Administrator is also responsible for collecting the required information and performing verifications on investors to comply with applicable anti-money laundering rules and regulations. … 6.8 Conflicts of interest The General Partner, the AIFM, the Investment Manager, the Investment Advisor, the Depositary, the Administrator and the other service providers of the Fund, and/or their respective affiliates, members, employees or any person connected with them may be subject to various conflicts of interest in their relationships with the Fund.”
“7.1.1 Shares Pursuant to the Law of 2016, Shares may only be subscribed and held by investors either (i) fulfilling the criteria of Well-Informed Investors or (ii) being members of the Board of Managers or being otherwise involved in the management of the Fund and its Compartments, The General Partner may further set additional eligibility criteria for investors. … 7.1.4 Changes to Compartments and Share Classes The rights and restrictions attached to Shares may be modified from time to time, subject to the provisions of the Articles of Association. Any changes to the Articles of Association will require a resolution of the general meeting of Shareholders, as further described in section 10.2 (Meetings of Shareholders) below. Subject to the above, the General Partner may change the characteristics of any existing Compartment, including its objective and policy, or any existing Share Class, without the consent of investors. In accordance with applicable laws and regulations, investors in the Compartment or Share Class will be informed about the changes and, where required, will be given prior notice of any proposed material changes in order for them to request the redemption of their Shares should they disagree. This Offering Document will be updated as appropriate. … 7.3 Eligible investors Shares may only be acquired or held by investors who (i) are Well-Informed Investors, as further described below, and (ii) satisfy all additional eligibility requirements for a specific Compartment or Share Class, if any, as specified for the Compartment or Share Class in the relevant Appendix (an Eligible Investor). … 7.5.1 Redemption application Investors may apply for redemption of all or any of their Shares on each Redemption Day at a Redemption Price equal to the Net Asset Value per Share for that Redemption Day. The Net Asset Value per Share for the Redemption Day at which an application will be processed is unknown to the investors when they place their redemption applications. … 7.8.3 Suspension of issue, redemption or conversion of Shares The issue, redemption or conversion of Shares in a Share Class shall be suspended whenever the determination of the Net Asset Value per Share of such Share Class is suspended by the Fund in accordance with section 8.4 (Temporary suspension of the Net Asset Value calculation) below and in other circumstances specified in the Articles of Association and this Offering Document.”
“The General Partner, upon consultation with the AIFM may temporarily suspend the calculation and publication of the New Asset Value per Share of any Share Class in any Compartment and/or where applicable, the issue, redemption and conversion of Shares of any Share Class in any Compartment in the following cases …”
“9.2 General Partner Fee The General Partner will be entitled to an annual fee and a performance fee as specified in the Appendix for each Compartment or Share Class, the fee will be paid out of the assets of the Fund and allocated to the relevant Compartments and Share Classes as described in section 8.2.5 (Allocation of assets and liabilities to Compartments and Share Classes) above 9.3 Management Fee The AIFM will be entitled to an annual fee for each Compartment or Share Class, and which will be paid by the General Partner out of its own fee. The AIFM will also be entitled to reimbursement by the General Partner of reasonable out-of-pocket expenses properly incurred in carrying out its duties. 9.4 Investment Manager and Investment Advisor Fee The fees of the Investment Manager and the Investment Advisor, if applicable, will be borne by the General Partner out of its own assets. 9.5 Performance Fee The AIFM may be entitled to receive a Performance Fee with respect to certain Compartments or Share Classes. It will be paid by the General Partner out of its own assets.”
“10.4 Changes to this Offering Document The General Partner, in close cooperation with the AIFM, may from time to time amend this Offering Document to reflect various changes it deems necessary and in the best interest of the Fund, such as implementing changes to laws and regulations, changes to a Compartment's objective and policy or changes to fees and costs charged to a Compartment or Share Class. In accordance with applicable laws and regulations, investors in the Compartment or Share Class will be informed about the changes and, where required, will be given prior notice of any proposed material changes in order for them to request the redemption of their Shares should they disagree. For Compartments in which the right for investors to request a redemption of their Shares is excluded, the General Partner will seek the prior written consent of any concerned investor(s) for any material changes to the Offering Document which have a bearing on the relevant investor's interests.”
“… Personal Data may be transferred to affiliated and third-party entities supporting the activities of the Fund which include, in particular, the AIFM, the Administrator, the Investment Manager and the Investment Advisor that are located in the European Union”
“Lux feeder fund discussion”
“the company has been incorporated … in order to launch the Skew Base Fund”
“Ziusudra is an advisor only for specific compartments. It is not a general advisor, it should not be mentioned here”
“Ziusudra is a in the [sic] STA Compartment a technology provider. It could be an advisor only for specific compartment. It should only be mentioned in the compartment appendix”
“the fixed fee for the Technological Service is not mentioned in the Offering Memorandum. Don’t we need to show that in the Prospectus”
“If it is not paid by the Fund, it does not need to be mentioned in the offering document.”
“In my view, no sophisticated investor would have invested such large sums of money in a fund such as the Fund on the understanding that it was, in essence, managed by VP fund, without carrying out this type of extensive due diligence in addition simply to reading the Offering Documents. The Fund was not accessible to inexperienced investors. If I was told that a sophisticated investor had invested in the Fund on this understanding and without carrying out proper due diligence of their own, I would be very surprised indeed. I am also mindful of the fact that the financial instruments utilised and the risks of losses involved in making an investment in the relevant sub-compartments of the Fund were explicitly and clearly documented and noted in the Offering Documents.”
“it’s 2 pages in the offering memorandum you have to read and then you know exactly what you buy”
“Thank you for your explanations. I think it is very dangerous to treat stability notes in the same way as a share index. The share index can recover after an event (crash, etc.), where the value of 50% also makes a lot of sense. The Stability Note, on the other hand, can become worthless and is guaranteed to stop recovering. The entire nominal can therefore be completely lost overnight. The diversification in the portfolio with regard to various stock markets is merely an illusion of diversification — in an event of a crisis, correlations will tend to approach 1. I would proceed as follows: -Break down each stability note with regard to its terms -then stress with an event (e.g. stock market -10%. -15%) => It is a lot of work, but afterwards, you will probably not be able to sleep well at an LTV of 50%. I recommend being more careful here. In my opinion, there are significant risks lurking here.”
“… it’s very important to have the time to market, which is very near the market price, then you need to be quick or relatively fast. If you execute such an order – such an advice two or three days later, then you can’t implement the investment strategy accordingly”
“When they see that it is a fund which relates to XY or any affiliated company, they would assume that they cannot do that for free”
“our assumption is that this has been part of the discussion between XY and their respective clients”
“If this would be a façade, this would be a façade for the whole fund industry”
“this is not a publicly available fund, and if I would invest a material amount into a fund and – because I’m interested in the investment strategy applied, I would ask the parties involved”
“Please keep in mind that this activity is technically done by Twinkle. So in this case, the overall message here is to say that Skew Base selects the best suppliers capable to find the best opportunities (in this case the best financial instruments in the market)”
“XY’s undisclosed connections to the Skew Base Fund”
“A statement of opinion is invariably regarded as incorporating an assertion that the maker does actually hold that opinion; hence the expression of an opinion not honestly entertained and intended to be acted upon amounts to fraud. And the same goes for projections as to the future: if a defendant says he expects an event to take place when he does not, he makes an untrue statement of fact. The only serious obstacle in the way of maintaining an action for a false representation on this basis lies in the difficulty of proving what the defendant’s real opinion was.”
“Furthermore, at least where the facts are not equally well known to both sides, then a statement of opinion by one who knows the facts best will often carry with it a further implication of fact, namely that the representor by expressing that opinion impliedly states that he believes that facts exist which reasonably justify it. If he does not actually believe in such facts, it follows that he will be liable in deceit. In such a case, the test as to whether a statement of opinion involves such a further implied representation will involve a consideration of the meaning which is reasonably conveyed to the representee. The material facts of the transaction, the knowledge of the respective parties, their relative positions, the words of the representation and the actual condition of the subject-matter are all relevant to this issue.”
“There is, in my judgment, a complete artificiality about an argument which starts with a statement which appears to amount to a promise, accepts that such promise has no contractual effect, proceeds to extract an implied statement of fact out of the promise, treats that as a statement that, unless corrected, the fact continues to exist, and concludes by stating that the legal effect is substantially the same as if the promise had been enforceable in the first place. As a basis for a claim in fraud it is, in my judgment, unsustainable.”
“… it is said that everything that is stated in the prospectus is literally true, and so it is; but the objection to it is, not that it does not state the truth as far as it goes, but that it conceals most material facts with which the public ought to have been made acquainted, the very concealment of which gives to the truth which is told the character of falsehood.”
“There is another type of ambiguity when the inference is open that the representor deliberately used ambiguous language intending to rely on its literal meaning, but hoping the representee would understand it differently. The contrast is between ambiguity that appears spontaneous, and that which appears contrived. In the latter case every presumption is made against he who used dubious language.”
“Statements connected by express or implied reference may form a single representation and their combined effect must be considered. This rule applies to statements in one document such as a prospectus, to statements in a number of documents such as a series of letters … This may render the composite representation false, though the components by themselves are true, or render it true, though some of the components, by themselves, are false. The composite representation may also be as false as every part, and every part as false as the whole.”
“First, in order to sustain an action of deceit, there must be proof of fraud and nothing short of that will suffice. Secondly, fraud is proved when it is shown that a false representation has been made (1) knowingly, (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states. To prevent a false statement from being fraudulent, there must, I think, always be an honest belief in its truth.”
“Any person making such a statement must always be aware that the person to whom it is made will understand, if not that he who makes it knows, yet at least that he believes it to be true. And if he has no such belief he is as much guilty of fraud as if he had made any other representation which he knew to be false, or did not believe to be true.”
“where the fact that an alleged belief was destitute of all reasonable foundation would suffice of itself to convince the court that it was not really entertained, and that the representation was a fraudulent one.”
“there is an evidential presumption of fact (not law) that a representee will have been induced by a fraudulent misrepresentation intended to cause him to enter the contract and that the inference will be “very difficult to rebut” to use the words of Lord Clarke.”
“XY hereby certifies that the investment strategy is consistent with the objectives expressed by the Client”
“The products were illiquid (or had limited liquidity), not diversified in terms of risk and purchased close to their expiration date”
“The value of investments held by a Compartment may decline in value due to factors affecting financial markets generally … During a general downturn in the economy, multiple asset classes may decline in value simultaneously”
“Under normal market conditions, and subject to applicable law and regulations and Morgan Stanley internal policy, Morgan Stanley & Co. International plc will use reasonable endeavours to quote bid and offer prices. However, Morgan Stanley & Co International plc will not be legally obliged to do so.”
“Under normal market conditions … issuer will use reasonable efforts to quote daily bid and offer prices with a 1% bid-offer spread”
“Example of an Insurance Note”
“I understood that 10X meant 10% loss for each point”
“Non-cumulative extreme events (in case of first occurrence the instrument stops with a 10% capital loss every 1% below the barrier)”
“the instrument stops” with (in this illustration) 10% capital loss for each 1%. That was a description of how the instrument worked, and it was accurate. The point being made was that (in this illustration), the daily fall would crystallise the loss. Even if the market fell thereafter, the loss on the MIN would not increase. So it was in that sense that the instrument “stopped”
“a. That XY was an independent financial advisor. This was intended, and was understood, to mean that: (i) the investments XY recommended to its clients (to include any investments it might recommend to the Claimants) were not connected to XY or to persons related to it, and (ii) the investments XY recommended to its clients (to include any investments it might recommend to the Claimants) did not result in commissions or similar benefits accruing to XY or persons related to it from the relevant platforms or institutions whose products were the subject of the recommendations. Alternatively, the matters identified at (i) and (ii) in this sub-paragraph were implied representations arising from the express representation that XY was an independent financial advisor; b. That XY was in a position to and would provide unbiased advice in relation to investments; (each individually a representation and together referred to as the Independence Representations).”
“In my mindset, an independent advisor …. selects the best market for you without any conflicts he has. And if he has, he has to share them.”
“And what we know now is that XY was heavily conflicted when it recommended that my clients invest in the Skew Base Fund”
“[T]hey already trusted XY by engaging us to provide services in respect of their assets and financial matters”
“Fiduciary duties are fundamentally proscriptive in nature, rather than prescriptive: fiduciary doctrine “tells the fiduciary what he must not do. It does not tell him what he ought to do”.”
“Principal’s consent”, the authors state: “(a) Principal’s consent. The fiduciary’s principal is competent to relax, or to forgo altogether, the protection which fiduciary doctrine provides him or her. The principal may authorise the fiduciary to act in a way which would otherwise be a breach of fiduciary duty, but the “relation must be in some way dissolved: or, if not, the parties must be put so much at arm’s length, that they agree to take the characters of purchaser and vendor”
“A conspiracy to injure by unlawful means is actionable where the claimant proves that he has suffered loss or damage as a result of unlawful action taken pursuant to a combination or agreement between the defendant and another person or persons to injure him by unlawful means, whether or not it is the predominant purpose of the defendant to do so.”
“i) The combination must be to the effect that at least one of the conspirators will use unlawful means. ii) It is unnecessary, in order for a combination to exist, that it be contractual in nature or that it be an express or formal agreement. iii) It is enough for liability to arise that a defendant be sufficiently aware of the surrounding circumstances and share the same object for it properly to be said that they were acting in concert at the time of the acts complained of. However, the conspirators do not need to have exactly the same aim in mind. iv) Direct evidence of the combination is not essential. It is also unnecessary for the claimant to pinpoint precisely when or where it was formed … v) Participation in a conspiracy is infinitely variable and may be active or passive. The courts recognise that it will be rare for there to be evidence of the agreement itself.”
“…The intention to injure element will be satisfied simply where the ‘gain to the conspirators is necessarily at the expense of loss to the victim’- see Palmer at [219], and at [220]-[222] per Judge Russen QC. It is ‘no defence for [a defendant] to show that their primary purpose was to further or protect their own interests …’ -see Lonrho Plc v. Al-Fayed (No.1) [1992] 1 A.C. 448, 466A per Lord Bridge. Whether a defendant had the requisite intention to injure “and therefore had joined the combination turns on whether they knew about the alleged conspiracy. Knowledge includes “blind eye” or “Nelsonian” knowledge as well as actual knowledge”: see Manek v. Wirecard AG[2020] EWHC 1904 (Comm) , at [45] per Sir Ross Cranston.”
“If this would be a façade, this would be a façade for a whole fund industry”
“whether one goes down the fiduciary duty route or the independence representations route, sets up the ultimate question: did they suspect that the claimants were being misled?”
“2.1.1(R) (1) A firm must act honestly, fairly and professionally in accordance with the best interests of its client (the client's best interests rule). 2.1.2(R) A firm must not, in any communication relating to designated investment business, seek to: (1) exclude or restrict; or (2) rely on any exclusion or restriction of; any duty or liability it may have to a client under the regulatory system 9A.2.1(R) When providing investment advice or portfolio management a firm must (1) obtain the necessary information regarding the client’s (a) knowledge and experience in the investment field relevant to the specific type of financial instrument or service; (b) financial situation including his ability to bear losses; and (c) investment objectives, including his risk tolerance, so as to comply with (2) (2) recommend investment services and financial instruments, or take the decision to trade, which is suitable for the client and, in particular, in accordance with the client’s risk tolerance and ability to bear losses. 9A.2.2(R) Firms should undertake a suitability assessment not only when making a personal recommendation to buy a financial instrument, but for all decisions whether to trade, including making any personal recommendations about whether or not to buy, hold or sell an investment. Assessing the extent of the information required 9A.2.4. Investment firms shall determine the extent of the information to be collected from clients in light of all the features of the investment advice … to be provided to those clients. Investment firms shall obtain from clients or potential clients such information as is necessary for the firm to understand the essential facts about the client and to have a reasonable basis for determining, giving due consideration to the nature and extent of the service provided, that the specific transaction to be recommended … satisfies the following criteria: (a) it meets his investment objectives of the client in question, including client’s risk tolerance; (b) it is such that the client is able financially to bear any related investment risks consistent with his investment objectives; and (c) it is such that he has the necessary experience and knowledge in order to understand the risks involved in the transaction.... Professional clients 9A.2.5 (R) Where an investment firm provides an investment service to a professional client it shall be entitled to assume that in relation to the products, transactions and services for which it is so classified, the client has the necessary level of experience and knowledge or the purposes of point (c) of paragraph (2). Where the investment service consists in the provision of investment advice to a professional client covered by Section 1 of Annex II to Directive 2014/65/EU, the investment firm shall be entitled to assume for the purposes of point (b) of paragraph (2) that the client is able financially to bear any related investment risks consistent with the investment objectives of that client.”
“advising on investments: the regulated activity … which is in summary: advising a person if the advice is: (1) Given to their person in their capacity as an investor or potential investor …; and (2) Advice on the merits of their doing any of the following (whether as principal or agent): (a) Buying, selling, subscribing for … a particular investment which is a security, structured deposit or relevant investment …’ or (b) Exercising or not exercising any right conferred by such an investment to buy, sell, subscribe for, exchange or redeem such investment … Investment advice: the provision of personal recommendations to a client, either upon the client’s request or at the initiative of the firm, in respect of one or more transactions relating to designated investments. personal recommendation: in relation to advising on investments a recommendation: (a) made to a person in their capacity as an investor or potential investor …; (b) which constitutes a recommendation to them to do any of the following (whether as principal or agent): (i) buy, sell, subscribe for …hold … a particular investment which is a security, a structured deposit or a relevant investment …; or (ii) exercise or not exercise any right conferred by such a relevant investment to buy, sell, subscribe for, exchange or redeem such an investment; (c) that is: (i) presented as suitable for the person to whom it is made; or (ii) based on a consideration of the circumstances of that person” (a) Buying, selling, subscribing for … a particular investment which is a security, structured deposit or relevant investment …’ or (b) Exercising or not exercising any right conferred by such an investment to buy, sell, subscribe for, exchange or redeem such investment … personal recommendation: in relation to advising on investments a recommendation: (i) presented as suitable for the person to whom it is made; or (ii) based on a consideration of the circumstances of that person”
“1. Integrity: A firm must conduct its business with integrity. 6. Customers’ interests: A firm must pay due regard to the interests of its customers and treat them fairly. 7. Communications with clients: A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading 8. Conflicts of interest: A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.”
“A key aim of FSMA is consumer protection. It proceeds on the basis that, while consumers can to an extent be expected to bear responsibility for their own decisions, there is a need for regulation, among other things to safeguard consumers from their own folly.”
“The court’s task is to ascertain the objective meaning of the language which the parties have chosen in which to express their agreement. The court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. The court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to the objective meaning of the language used. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other. Interpretation is a unitary exercise; in striking a balance between the indications given by the language and the implications of the competing constructions, the court must consider the quality of drafting of the clause and it must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest; similarly, the court must not lose sight of the possibility that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms. This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated. It does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each.”
“The Client shall always have full decision-making and executive authority with regard to all strategic and operational decisions relating to the Service”
“The recommendations and Reports provided to the Client shall be solely for the Client’s benefit. No other party may place reliance upon such recommendations or Reports”
“Where an investment firm provides an investment service to a professional client it shall be entitled to assume that in relation to the products, transactions and services for which it is so classified, the client has the necessary level and experience and knowledge for the purposes of point (c) of paragraph 2.”
“The threshold test for the negligence of a professional is often expressed as being whether no reasonably competent IFA, in the position of [the Defendant’s representative] could have advised that [the product] was suitable for [the Claimant]. That is not necessarily the same as asking whether reasonable care was taken in recommending [the product to the Claimant], because reasonable care might not have been taken but a competent advisor exercising all reasonable care would still have given the same advice.”
“58. Wherever the dividing line is to be drawn in the case of investors, the result is likely to be heavily dependent on the circumstances of each individual and the nature and pattern of investment. At one end of the scale may be the retired dentist who makes a single investment for a modest amount by way of pension provision. At the other may be an investment banker or asset manager who plays the markets widely, regularly and for substantial amounts, for his own account. In between there are many factors which might influence the result, including the profile of the investor, the nature and extent of the investment activity, and the tax treatment of any profits or losses. The issue is fact specific.”
“[62] The question is whether a private individual committing capital to speculative currency transactions in the hope of making investment gains is, or can be, a “consumer” in that definition. Wealthy consumers are consumers none the less and the amounts involved in this case do not mean Ms Ang was not a consumer. For example, in Pammer v Reederei Karl Schlüter GmbH & Co KG (Joined Cases C-585/08 and C-144/09) [2012] Bus LR 972;[2010] ECR I-12527 , contracts for an ocean cruise and an alpine holiday were held to be consumer contracts. Of course, going on a family holiday, even if it is a very expensive holiday, could not sensibly be thought of as a business venture. But I reject any notion that speculative investment, putting capital at risk in the hope of achieving an investment gain, must necessarily be a business activity, i e cannot ever be a consumer activity. [63] In my judgment, the investment by a private individual of her personal surplus wealth (i e surplus to her immediate needs), in the hope of generating good returns (whether in the form of income on capital, capital growth, or a mix of the two), is not a business activity, generally speaking. It is a private consumption need, in the sense I believe intended by the ECJ in Benincasa, to invest such wealth with such an aim, i e that is an “end user” purpose for a private individual and is not exclusively a business activity. That means, as was also Popplewell J’s conclusion in AMT v Marzillier[2015] QB 699 , that it will be a fact-specific issue in any given case whether a particular individual was indeed contracting as a private individual to satisfy that need, i e as a consumer, or was doing so for the purpose of an investment business of hers (existing or planned). [64] The question is where, if at all, to draw the line. Take private equity investment made with a view to generating a return on capital (venture capitalism). I should have thought the making of such investments would be regarded, generally, as by nature a business activity; and no less so if for the venture capitalist in question that activity was not her primary occupation but a sideline through which to invest some or all of her wealth generated in some other way (e g out of earnings, inheritance or gifts). On the other hand, an individual shopping around the retail market for a better interest rate on a large lump sum she is happy to lock away for a year or two, because it is surplus to any shorter-term need for access to capital, or choosing with a view to a better return to invest in a FTSE 100 tracker fund instead, would surely be regarded as a consumer, applying faithfully all that the ECJ/CJEU has said on the point. [65] I therefore agree, in general, with the observation of Popplewell J in AMT v Marzillier, para 58, quoted at para 40 above, although I would add this amplification, namely that the spread, regularity and value of investment activity cannot (I think) determine the issue, as that would replace the test of non-business purpose set by the language of the Brussels (Recast) (as it now is). It may be, on the facts of any given case, that widespread, regular and high-value trading will encourage a conclusion that the putative consumer was engaged in investing as a business, so that the contract in question had a business purpose. But that question of purpose is the question to be asked, and it must be considered upon all of the evidence available to the court and not by reference to any one part of that evidence in isolation.”
“Where experienced businessmen representing substantial companies of equal bargaining power negotiate an agreement, they may be taken to have had regard to the matters known to them. They should, in my view be taken to be the best judge of the commercial fairness of the agreement which they have made; including the fairness of each of the terms in that agreement. They should be taken to be the best judge on the question whether the terms of the agreement are reasonable. The court should not assume that either is likely to commit his company to an agreement which he thinks is unfair, or which he thinks includes unreasonable terms. Unless satisfied that one party has, in effect, taken unfair advantage of the other - or that a term is so unreasonable that it cannot properly have been understood or considered − the court should not interfere.”