The client’s lawyer submitted several similar cases to the Ombudsman in which the clients were managed by the same external asset manager. The bank was also represented by an external lawyer. The parties’ positions appeared hardened and irreconcilable.

In most of these cases, it was disputed whether a margin call had been made in a legally sufficient form prior to the forced liquidation, i.e. whether the clients had been made aware of the shortfall in cover of their positions and had been requested to rectify this within a certain period of time by securing the credit with additional cover or reducing it by selling assets.

In the cases in which the bank acknowledged fault, it was disputed whether the correct point in time had been chosen for the calculation of damages in connection with the liquidation of the assets, which were subject to price fluctuations. This was decisive in the present case because the bank had initially categorically denied any wrongdoing. When it finally acknowledged such fault after several months of clarification, the securities prices on the relevant markets had risen substantially again.

The bank took the view that the clients had put themselves in a difficult situation through the risky investment strategy of the asset manager. During the critical period, the bank had been in constant contact with the asset manager, who had been informed about all essential steps. A formal margin call was therefore not necessary. In addition, due to the urgency resulting from the market turbulence, it was entitled to an immediate forced sale even without a prior margin call.

With regard to the relevant point in time for the calculation of damages, the bank referred to a decision of the Swiss Federal Supreme Court, which in its view clearly stated that in an execution-only relationship the point in time at which the client became aware of the unlawful sale was decisive. From this point in time, the client is able to take measures to mitigate the damage, e.g. by recovering the securities that he believes were wrongly sold. A client may not wait for a longer period of time before claiming damages. With its case law, the Federal Supreme Court wanted to prevent a client from waiting for a price development that was favourable to him.

In the case at hand, the client had filed his claim with the bank promptly after what he considered to be the illegitimate forced sale of his securities. The bank had rejected his claim and then examined the various cases of the asset manager’s clients submitted to it in more detail, for which it took several months. Finally, the bank informed the client that the forced sale of three of the four positions had not been indicated, as the shortfall had already been corrected after the sale of one of the four positions. It calculated the damages on the basis of the prices that had applied on the day the claim was first asserted and did not take into account the price development in the meantime.

The Ombudsman tried to persuade the bank to accommodate the client more generously. On the one hand, he was of the opinion that, based on the applicable contracts and the provisions of the Intermediated Securities Act, a formal margin call would have been necessary prior to the forced realisation. The bank’s contracts provided for a possible waiver of a margin call only in the event that the client could not be reached at the relevant time, which was undisputedly not the case here.

In addition, the Ombudsman took the view that the Federal Supreme Court decision cited by the bank contained elements that did not correspond to the present case and that, according to the Federal Supreme Court’s reasoning, the relevant point in time for the calculation of damages should take into account all the material circumstances of the individual case. In the Ombudsman’s view, greater emphasis should have been placed on the point in time at which the customer could reasonably have been expected to take measures in good faith to mitigate the loss. It appeared questionable to the Ombudsman whether this was already the case at the time when the bank had categorically denied any wrongdoing when the client first claimed damages.

The Ombudsman would therefore have welcomed it if the parties, who were both able to present valid arguments for their positions, had come closer and agreed to a settlement of the dispute submitted to him. Unfortunately, due to the uncompromising attitude of the bank, this was not possible, so he had to close the case without result.