The Bottom Line
- 100% Liability for Intermediary Actions: A company can be held fully liable for all client losses if its intermediary provides unlicensed, personalized financial advice, and the company knew or should have known about it. Arguments of contributory negligence by the client will likely fail.
- “Willful Blindness” Is No Defense: The court rejected the argument that the company was unaware of the intermediary’s specific actions. A business model that relies on intermediaries to provide “personal advice” creates a duty for the company to verify their legal authority to do so.
- Due Diligence on Sales Channels is Critical: Companies must actively investigate the practices and licenses of their sales partners. Relying on regulators to police them is not a sufficient defense against civil liability.
The Details
This case revolves around a long-running dispute concerning “securities lease” agreements sold by financial services firm Dexia. The agreements were sold to consumers not by Dexia directly, but through an intermediary. The core of the dispute was whether this intermediary crossed the line from simply introducing a client (a permitted activity for a “client remisier”) to providing personalized financial advice—an activity for which it held no license. The Hague Court of Appeal has now confirmed that such actions make Dexia, the product provider, fully liable for the resulting damages.
The court’s reasoning hinged on the definition of “advice.” Following guidance from the Dutch Supreme Court, the key test is whether the intermediary made a personalized recommendation. This occurs when an intermediary proposes a specific financial product as being suitable for a particular client, especially after inquiring about their financial circumstances, goals, and risk appetite. In this case, the clients provided a detailed account of the intermediary visiting them at home, discussing their financial situation, and recommending specific Dexia products as a solution. The court found this account credible and sufficient to prove that unlicensed, personalized advice was given. Dexia’s simple denial, citing a lack of direct knowledge, was deemed insufficient.
Crucially, the court held Dexia responsible for this conduct because it knew or should have known what its intermediary was doing. The court pointed out that Dexia’s business model heavily relied on these intermediaries as a sales channel, even marketing them as specialized advisors who could provide personal guidance. This created an obligation for Dexia to ensure its partners were operating within the law. The fact that the intermediary publicly presented itself as a financial advisor (on its website and in official registers) made this information easily verifiable. By failing to perform this due diligence, Dexia assumed the risk of its intermediaries acting improperly, making it directly liable for the consequences.
Source
The Hague Court of Appeal
