Woman, son, were not protected as investors, court rules
The Seoul Central District Court ruled that Daetoo Investment and Security should pay compensation of about 110 million won (US$125,000) to a 78-year-old woman that lost nearly 158 million won after being told by the company that she should invest in high-risk stocks.
Even though the woman signed a note of confirmation saying that she takes responsibility for her judgment, the court ordered the stock company and several of its employees to compensate 70 percent of her losses.
The woman visited a branch of Daetoo with her son in February 2004 and invested 550 million won in financial derivatives. At the time, she signed a note of confirmation saying that she fully understood the contents of the transaction and that the transaction was fully under her judgment and responsibility. However, due to a slump of share prices in May 2005, the woman and her son suffered a loss of about 158 million won and closed the account in March 2005.
She filed a suit against the stock company and its workers, claiming that they violated their obligation to recommend suitable investments to customers. In response, the company denied its responsibility, saying, "We sufficiently explained to the investors about the financial product and its risks when they opened the account."
According to the court ruling, the company and its employees neglected their obligation to protect the woman and her son as investors, citing her old age and her not being involved in subsequent transactions after opening her account. Moreover, the company recommended to them a highly risky financial product, the court said. "The plaintiffs opened the account following the recommendation of the defendants, and as a result, they lost some of their money. Therefore, the defendants should compensate for the plaintiffs' loss, "ruled the court. However, the court limited the compensation to 70 percent of the loss, because the plaintiffs did make the final decision on the investment. Please direct questions or comments to [englishhani@hani.co.kr]
