Current Tax Developments - Speculation

The Paris Court of Appeal has jugded (C.A. Paris March 18, 1994, Locatelli vs. Goy-Hauvette) that a financial intermediary has an obligation to warn its clients of the risks associated with excess speculative investments on the Paris "Matif".

As a consequence, the court considered that the intermediary could be held liable when it:

- did not give its client precise information on the envisioned operations and on the related risks ;

- did not warn its client of the risks incurred by its client as a result of investments which were becoming more and more risky on a high risk market ;

- while, pursuant to the contract concluded with the client, the intermediary had an obligation to call margins on a daily baisis if necessary, it had called the said margins two months after the first debit balance created by the client's investments.