The principle of negligence in financial institutions

Application in suitability obligations

——A Case of Yi Mou v. Bank A and other property damage compensation disputes

Judgment points

In hearing cases of civil compensation disputes caused by investors’ losses in purchasing financial products, the courts should adhere to the principle of “sellers are responsible and buyers are responsible”. Investors knowing the investment risks and committing to bear their own investment risks, if they voluntarily choose to subscribe for wealth management products that exceed their risk tolerance and incur losses, they shall bear their own investment risks; if financial institutions have not fully fulfilled their risk notification obligations, they shall also Take responsibility for the corresponding fault.

In March 2011, the plaintiff B, as the asset trustee, signed the Asset Management Contract at the defendant Bank A, subscribing to a 1 million yuan open-end fund with a third-party propyl gold company as the manager. The "Asset Management Contract" stipulates that the scope of investment is mainly invested in A shares listed and traded on domestic stock exchanges (including but not limited to ChiNext, new stock subscription and private placement), stock index futures, funds (stock type, bond type, currency type) , Hybrid, etc.), bonds, warrants, bond repurchases, and other financial instruments allowed by laws and regulations or regulatory agencies. Mr. B signs and confirms on the transaction slip, and says under the signature: “I am fully aware of the risks of investing in open-end funds, and I voluntarily handle the fund business represented by Bank A, and bear the investment risk”; Mr. B’s “Risk” on the back of the transaction slip Sign below the reminder letter. Bank A issued the "Personal Customer Risk Assessment Print" to B, prompting: B’s risk tolerance rating and products suitable for purchase are robust. On the same day, Mr. B submitted the "Personal Product Wealth Management Business Transaction Information Confirmation Form" with his signature to Bank A, stating: "According to the results of the "Personal Customer Risk Assessment Questionnaire" conducted by you, I am not suitable to purchase this product. However, I believe that I have fully understood and clearly understood the risks of this product, and I am willing to bear related risks, and have sufficient risk tolerance and investment discrimination ability to purchase this product. I hereby specifically declare that the decision and implementation of this investment are my voluntary choice , The risk caused by the investment result shall be borne by myself". In the "Stock Index Futures Trading Risk Reminder Letter" attached to the aforementioned "Asset Management Contract", the asset principal is blank. Later, due to losses in the financial products involved, Mr. B sued Bank A to compensate for the investment losses of RMB 180,642.62 and interest on the grounds that Bank A voluntarily recommended financial products higher than his risk tolerance.

It was also found that Yi had purchased a 1 million yuan "Bank of China No. 8" fund similar to the fund involved in 2010 and made a profit. The investment scope of the "Bank of China No. 8" fund is: financial instruments with good liquidity, including investment in domestic legally publicly issued and listed stocks, bonds, warrants, securities investment funds, and other financial instruments allowed by the China Securities Regulatory Commission to invest in this plan ; Other products (such as stock index futures, etc.) that the plan will be allowed to invest in by laws and regulations or regulatory agencies in the future. When B bought the fund, he also signed the "Open-end Fund Transaction Receipt (Personal)" and the "Risk Warning Letter" on the back of the receipt.

It is also found that Yi is a shareholder of a company and has been engaged in equity investment since 2015, with a relatively high investment amount.

The Shanghai Xuhui District People's Court ruled to dismiss all of Yi's claims, and Yi appealed to the Shanghai No. 1 Intermediate People's Court. The court of second instance ruled that Bank A compensates Yi for an investment loss of 180,642.62 yuan. Bank A applied to the Shanghai Higher People's Court for a retrial. The Shanghai Higher People's Court held that the loss sharing of the financial products involved in the case should be comprehensively considered with the size of the fault liability of both parties. First of all, according to the risk assessment results, B is a conservative investor whose risk tolerance is higher than that of a conservative investor whose primary goal is to protect the principal from loss and maintain the liquidity of assets. As a natural person with general cognitive ability, when Bank A fulfills its risk warning obligations, the risks of his trading activities and the possible legal consequences of the aforementioned written commitments should be known. Judging from Y’s investment experience, before purchasing the financial products in dispute in this case, he had purchased financial products with the same risk level as the financial products in dispute in this case, and obtained profits, combined with Y’s former shareholder of a company and subsequent equity interests Considering investment and other high-risk investment behaviors, B should be a financial investor with a certain amount of experience, so he should have an expectation of the risk of loss in the disputed financial product. In a written promise that Mr. B is willing to bear the risk and there is no evidence to prove that Bank A has actively promoted, Mr. B shall bear the main responsibility for the principal loss of the financial products involved in the case in accordance with the principle of "buyer's own responsibility". Secondly, Bank A has incomplete risk notification procedures in the process of selling financial products in dispute, has not fully and completely performed the risk notification obligations of financial products, and has faults, and shall be liable for compensation for the loss of principal. In view of the loss of principal by Mr. B himself Assuming the main responsibility, Bank A’s liability for compensation can be appropriately reduced and assume 40% of the liability for compensation.

In summary, the Shanghai Higher People's Court issued (2016) Huminzai No. 31 retrial judgment on October 8, 2019: Bank A compensates B for a loss of 72,142.95 yuan and dismisses B's remaining claims.

With the deepening of the concept of financial consumer protection, the financial consumer protection mechanism is becoming more and more complete, the suitability obligations of financial institutions (hereinafter referred to as "compliance obligations") have received widespread attention, and the performance of suitability obligations between investors and financial institutions The litigation triggered is endless. The Securities Law revised in 2019 (hereinafter referred to as the “New Securities Law”) absorbs the suitability obligations of securities companies in the previous administrative supervision regulations, which greatly improves the effectiveness of suitability obligations and compensates for the previous court The shortcoming of only being able to refer to the spirit of administrative supervision documents to make judgments has given securities investors more adequate protection and provided a clear legal basis for the court to try such cases. In the past judicial practice, there are differences in the understanding of the extension of the obligation of suitability and the responsibility for violating the obligation of suitability, and the judgment conclusions are not uniform. For example, some judges view that the obligation of suitability is simply equivalent to the obligation of risk notification and explanation, but does not pay attention to the problem of investor risk matching. They believe that as long as the financial institution fulfills the obligation of risk notification and explanation, it is not at fault and does not need to bear the liability for compensation; According to the judge’s opinion, investors who purchase investment products that exceed their risk tolerance should bear the investment risk; there are also judges’ opinions that take a strict attitude towards financial institutions and believe that financial institutions should invest in financial institutions as long as they fail to fulfill their appropriate obligations. Compensation for all losses, regardless of the investor’s previous investment experience and other own factors. In response to the current situation of different understandings and judgments of courts in various regions in judicial practice, the 2019 National Court Minutes of Civil and Commercial Trials (hereinafter referred to as the "Nine Peoples Minutes") clarified that the courts are trying to deal with civil and commercial matters involving the appropriateness of financial institutions. Compensation disputes should follow the principle of "seller's responsibility, buyer's responsibility". Therefore, it is the premise and basis for the court to determine the liability for investment losses based on the basis of civil compensation litigation by fixed investors based on the flaws in the performance of the appropriateness obligations of financial institutions, and a reasonable definition of the boundaries of rights and obligations between investors and financial institutions. In this case, on the basis of comprehensive consideration of the faults of both parties, the court established a ruling rule that investors and financial institutions should share losses according to their respective faults. Combining the spirit of the new "Securities Law" and "Minutes of the Nine Peoples", make a comment and analysis on this case:

1. Overview of the appropriateness obligation

The obligation of appropriateness originated from the trading rules of the self-regulatory organization of the US securities industry and the "signature theory". In 1939, the National Association of Securities Dealers (NASD) adopted an appropriateness system for the first time in its “Rules of Fair Practice” to regulate the recommendations made by securities firms to institutional investors, requiring When making any recommendation, the broker must be based on a "sufficient and reasonable basis." Since the 1990s, non-institutional securities investors have also been included in the protection objects of the suitability system established by NASD. The investor suitability system was originally an ethical obligation, but the U.S. Securities and Exchange Commission (SEC) has further upgraded it to a "quasi-legal, quasi-ethical" business code and will violate the suitability obligation The cases of securities fraud or deception included in the provisions of Section 10b-5 of the Securities Exchange Act of 1934 have also been adopted by the US courts. It is not long for my country's financial legislation and supervision to introduce appropriate obligations, and administrative supervision and judicial rules are still in the stage of gradual improvement.

(1) The definition of the obligation of suitability

Financial institutions’ awareness of financial product trading patterns and financial market risks is significantly higher than that of ordinary financial investors. In the sales activities of wealth management products, financial institutions should conduct an assessment of investor risk levels in accordance with regulatory requirements. On the basis of understanding the cognitive level and risk tolerance of investors, rationally guide investors to engage in financial transactions that are compatible with their cognitive level and risk tolerance. Clarifying the connotation and extension of the obligation of suitability in judicial practice will help the court accurately clarify the boundaries of the parties’ rights and obligations and ensure the uniformity of the application of law. At present, the theoretical and practical circles have carried out extensive and in-depth research on the appropriateness obligation, but their focus is often on the specific content of the appropriateness obligation and what responsibilities financial institutions should bear for violating the obligation, and what is the appropriateness obligation It lacks a unified expression. As my country’s financial industry implements the "separated supervision" model, each supervisory authority only formulates differentiated supervisory rules and regulatory documents based on the characteristics of the market subject under its supervision. The courts also bring some inconvenience when referring to financial regulatory regulatory documents . Judging from the past judgments of some courts, there are indeed differences in the understanding of the content and performance standards of the suitability obligation and how to apply financial regulatory documents, so it is difficult to ensure the uniformity of the judgment standards.

The accurate definition of relevant legal concepts is the prerequisite and basis for the court to unify judgment standards and standards. The Supreme People's Court conducted a special study on the issue of suitability obligations at the Eighth National Civil and Commercial Trial Work Conference held in 2015, and finally clarified the definition of suitability obligations in the "Minutes of the Nine Peoples". The "Jiumin Minutes" pointed out that the obligation of suitability refers to the seller’s promotion and sale of bank wealth management products, insurance investment products, trust wealth management products, securities firms’ wealth management plans, leveraged fund shares, options and other over-the-counter derivatives to financial consumers. And other high-risk financial products, as well as providing services for financial consumers to participate in high-risk investment activities such as margin trading, new third board, ChiNext, science and technology innovation board, futures, etc. The obligation to sell (or provide) appropriate products (or services) to appropriate financial consumers.

According to the above definition, the performance of the suitability obligation is the seller’s institution—including but not limited to financial market operators such as commercial banks, securities companies, futures companies, fund management companies, and trust companies; the performance of the suitability obligation is financial consumers. That is, the buyer and service recipient of financial products; the fulfillment content includes the obligations of understanding customers, understanding products, and proper promotion and sales. It is worth noting that the above definition highlights "high-risk" financial products, derivatives, and other high-risk financial investment activities, and embodies the original intention of the institutional design that the suitability obligation gives financial investors inclined protection.

(2) Necessity analysis of appropriateness obligation

The specialization and high-risk characteristics of financial transactions put forward higher requirements for the specialization of investors. In addition to mastering the basic knowledge of financial transactions, there should be a full understanding of transaction risks. Since there is a natural gap between financial investors and financial institutions in terms of financial expertise and risk resistance, the rights and obligations between the two parties are likely to be unbalanced. Therefore, financial institutions should be properly taught from the beginning of the financial transaction contract. Sexual obligations are an important mechanism for giving investors preferential protection and are necessary to strengthen investor protection.

1. Information asymmetry

The specialization of financial transactions determines that the information asymmetry in the financial market is more prominent, especially in the field of financial investment. The professional knowledge of the transaction subject and the amount of market information directly determine whether it can be profitable, and the party with weak information The legitimate rights and interests of the company are liable to be infringed. Therefore, financial institutions occupying an information dominant position must fully and completely disclose the information of financial products sold to investors so that investors can make transaction decisions that meet their own interests and expectations, starting from the source Realizing the fairness of financial transactions is also an inevitable requirement for promoting openness and transparency of financial markets.

In practice, the causes of disputes between investors and financial institutions are concentrated on improper sales behaviors of financial institutions, including flaws in product descriptions and risk disclosure obligations, and even misleading statements made by financial institutions that lead investors to engage in transactions with them The risk level does not match. The theory of information asymmetry originated from economics and was first proposed by the American economist George Akerlov in his economics paper "Lemon Market: Quality Uncertainty and Market Mechanism" published in 1970. The article was published. Created a new research field of economics-information economics. Taking the US second-hand car trading market as an example, Akeroff demonstrated that the information asymmetry existing between market counterparties will eventually enter an incomplete market state where “bad money drives out good money”. The economist Joseph Stiglitz extended the theory of information asymmetry to the insurance market and also concluded that only a fully information market can benefit both parties to the transaction. In reality, financial institutions, in order to attract customers, exaggerate returns, avoid risks, and “package” high-risk products into low- and medium-risk products, and damage to the rights and interests of investors still occurs. Therefore, the “knowing the product” requirement of the appropriateness obligation, It can balance the information asymmetry between investors and financial institutions to a certain extent, and promote openness and transparency in the market.

2. Asymmetry between risk judgment and tolerance

Due to the huge professional gap between financial investors and financial institutions, regardless of whether the investor is a qualified investor, he is always weaker than financial institutions in terms of risk judgment and risk tolerance. The reason is that investors’ risks Judgment is almost entirely dependent on the information disclosure of the products sold by financial institutions. Although qualified investors have a considerable degree of financial transaction experience and basic knowledge, they cannot of course assume that they have a full understanding of the risks of every type of financial product; In terms of economic strength, the personal assets of investors cannot be compared with financial institutions with strong economic strength, and their ability to withstand financial risks is weaker. Therefore, stricter and more careful protection measures are required. The requirement of “knowing the customer” in the investor suitability obligation is that financial institutions should fully understand the investor’s asset situation, professional level, investment experience and risk appetite and other information, and objectively evaluate the investor’s risk tolerance through risk level evaluation and other methods Ability, so as to avoid investors may bear the risk of loss that does not match their risk tolerance.

3. Unequal relief capacity

The information asymmetry, economic strength, and professional level gaps between investors and financial institutions determine their unequal ability in seeking relief. Financial institutions with information advantages are bound to be stronger than the other in terms of proof. For financial institutions with strong economic power, they usually have established a more professional legal dispute handling mechanism, which is sufficient to deal with such litigation, but for ordinary investors, they often need to pay a higher cost of rights protection. In litigation, the distribution of the burden of proof often determines the ownership of the litigation interest. To balance the remedy capabilities of both parties, the "Jiu Min Minutes" adopts the inversion of the burden of proof, and the financial institution assumes the burden of proof for having fulfilled the appropriateness obligation. The risk assessment and corresponding management system of financial products (or services) have been established, the risk perception, risk appetite and risk tolerance of financial consumers have been tested, and financial consumers have been informed of the benefits and main benefits of the products (or services). In case of risk factors and other relevant evidence, it shall bear the consequences of failing to provide evidence. At the same time, the "Minutes of the Nine Peoples" also set higher certification standards for financial institutions. Financial consumers cannot simply write "I clearly understand that there may be a risk of principal loss" to prove that they have fulfilled the risk notification statement. Obligations, financial institutions should also provide other relevant evidence, such as audio-visual materials such as audio and video recordings at the time of the contract.

(3) The specific content of the suitability obligation

In the past judicial practice, there are still differences in the understanding of the specific content of the suitability obligation. For example, some courts have replaced the suitability obligation with the risk notification obligation, and other courts have restricted the suitability obligation within the scope of "appropriate sales". As a result, the judgment conclusion is not uniform. In addition, most courts insist on the idea of freedom of contract and the buyer's own risk. Investors have repeatedly run into walls in suitability litigation, and it is difficult to obtain judicial relief. Regarding the specific content of the suitability obligations, at the legislative level, the new Securities Law has defined the suitability obligations of securities investors. Article 88, paragraph 1 of the new Securities Law defines the suitability obligations of securities companies as the following three aspects The content of "knowing the customer", "knowing the product" and "appropriate sales behavior" provides a legal basis for the court to determine whether a securities company has fulfilled its obligation of appropriateness. At the level of judicial practice, the "Jiumin Minutes" believes that the obligation of suitability mainly consists of the following three parts: First, financial institutions conduct risk assessment and classification of potential customers to meet customer requirements; second, financial institutions inform customers about financial products Specific conditions to meet the requirements of understanding products; the third is to sell appropriate products to appropriate customers to meet the requirements of reasonable recommendation and appropriate sales. The above three obligations constitute the obligation group of the appropriateness obligation.

This article believes that the specific content of the appropriateness obligations summarized in the new Securities Law and the Jiumin Minutes is relatively comprehensive, and from the perspective of the process of investor contracting, there is also a strong logical connection between various obligations: First, Risk assessment and classification are the basis for determining the investor’s risk appetite and risk tolerance, so as to determine the investment direction that matches the investor. This is also a prerequisite for financial institutions to classify and manage customers; secondly, the premise of clarifying customer needs Next, explain the financial products that investors may choose, that is, information disclosure obligations, such as introducing to investors important terms such as the investment direction of financial products, the status of the underlying assets, the investment period, and the expected rate of return, and the core of which lies in the investment Risk disclosure must enable investors to clearly understand the risk of loss in the investment, so that investors can choose according to their own risk preferences; finally, financial institutions can only sell to investors on the premise of fully performing risk assessment and information disclosure Financial products that match their risk tolerance level. Therefore, as long as the financial institution has flaws in the performance of one of the above three obligations, it constitutes a breach of the appropriateness obligation.

2. The legal basis of the obligation of suitability-liability for negligence in contracting

In judicial practice, civil compensation lawsuits between investors and financial institutions often have overlapping claims. Investors can either claim breach of contract based on entrusted financial management agreements with financial institutions, or bring infringement actions. The difference in the right to claim determines the application of the law and directly affects whether the rights and interests of investors can be realized. Therefore, the identification of the basis of the right of claim for compensation by investors from financial institutions is the first issue that the court must resolve. The Jiumin Minutes believes that the suitability obligations of the seller’s organization fall within the scope of pre-contract obligations stipulated in Article 42 of the Contract Law, and that the seller’s civil liability for breach of suitability obligations is the liability for negligence in contracting. This article agrees with this statement that the suitability obligation based on the liability for negligence in contracting has an independent basis of claim.

(1) Overview of liability for negligence in contracting

1. Concept and theory traceability

The so-called culpa in contrahendo (culpa in contrahendo) means that during the conclusion of the contract, one party violates its obligations based on the principle of good faith, which results in the loss of the other party's trust interests, and shall bear the liability for damages. The theory of negligence in contracting was published in 1861 by Rudolf von Jelling, a jurist of the German neo-utilitarian school of law, in the fourth volume of the "Yelling Civil Law Annual Report" edited by him. It was first mentioned in the article "Compensation for Damages at the Time of Conclusion". In the introduction of the article, he discussed three cases of information transmission errors in the process of contracting, and then put forward: "In the above three cases, the negligence occurred in the process of establishing the contractual relationship, the reason why one party suffered losses , Because of the execution of a contract that has been established from an external point of view that was proposed to him by others. Therefore, I found a field with a definite scope for our fault, that is, the fault in the conclusion of the contract: fault in contracting "The theory of negligence in contracting is a major discovery of Yelling in the field of law, and it provides a theoretical basis for protecting the expected interests of parties in the contracting stage. According to the German general theory, the substantive law of liability for negligence in contracting is based on the principle of good faith stipulated in Article 242 of the German Civil Code. In terms of written legislation, the "German Civil Code" did not immediately absorb the theory of negligence in contracting at first, but gradually developed the theory of negligence in contracting into a general rule in the case law of German courts. By 2002, the "German Debt Law Modernization Act" Liability for negligence in contracting is incorporated into the statutory system. The second paragraph of Article 311 of the German Civil Code stipulates the liability for negligence in concluding a contract. This article stipulates: "The relationship of debts containing the obligations set forth in Article 241, paragraph 2 also occurs in the following situations: (1) Contract negotiation (2) Preparation of the contract, and one of the parties has the opportunity to affect its rights, legal interests or interests in view of the transaction relationship that will occur, or entrust the rights to the other party, or (3) similar transactions contact".

2. Constitutive elements of liability for negligence in contracting

Some scholars have proposed that Article 16 Paragraph 1 of my country's Economic Contract Law of 1981 and Article 61 Paragraph 1 of the General Principles of Civil Law of 1986 were the first legal provisions in my country to introduce the theory of negligence in contracting. Under the circumstances, the responsibility for negligence in the contract was admitted. However, due to the fact that the research on the theory of negligence in concluding a contract has not been carried out in depth by the legal circle of our country at that time, the scope of liability for negligence in contracting is limited to the circumstances where the contract is cancelled and confirmed invalid. In addition, no other constituent elements are specified.

The 1999 "Contract Law" has perfected the provisions on the liability for negligence in concluding a contract. According to the inherent spirit of Article 42 of the Contract Law, the constituent elements of liability for negligence in concluding a contract include the following three items: (1) Acts that occurred in the process of contracting (2) This behavior violates the principle of good faith, and the specific circumstances include: first, signing a contract under the guise of negotiating in bad faith; second, deliberately concealing important facts related to the conclusion of the contract or providing false information; Acts that violate the principle of good faith; (3) Cause losses to the counterparty of the contract, that is, there is a causal relationship between the two. Article 500 of the Civil Code of the People’s Republic of China, which has not yet officially entered into force, completely inherits Article 42 of the Contract Law. It can be seen that the academic circles have not had obvious differences on the elements of liability for negligence in contracting.

(2) The obligation of suitability is pre-contractual obligation

The general theory believes that the liability for negligence in contracting is based on the liability for damages arising from the breach of the pre-contractual obligation (Vorvertragliche Pflict). “As long as the parties violate their pre-contractual obligations that should be based on the principle of good faith and destroy the contracting relationship, It constitutes negligence in the conclusion of the contract." Some people believe that the parties have certain collateral obligations when entering into a contract. These obligations are called pre-contractual obligations; but there are also views that there is no essential difference between collateral obligations and pre-contractual obligations. Refers to obligations arising from the principle of good faith. In terms of suitability obligations, it should refer to the obligations of financial institutions to perform investor risk assessment, product information disclosure and risk notification, and appropriate sales in the process of selling financial products. The above-mentioned obligations are not only required by financial supervision, but also The ethical requirements of the transaction behavior of financial market entities are the principles of honesty and fairness. This article believes that in terms of the time of obligation performance, the appropriateness obligation should belong to the pre-contract obligation. It is stated that in order to ensure the fairness of financial transactions, financial institutions should uphold the utmost goodwill, truthfully and fully explain the structure of financial products, content and risks to investors, so that financial investors can independently choose the ones that suit their own risk preferences and risk tolerance. product.

(3) Violation of the obligation of suitability shall be liable for negligence in contracting

According to the traditional theory of negligence in concluding a contract, liability for negligence in concluding a contract is the responsibility that should be borne after the contract is cancelled or confirmed invalid. In judicial practice, most of the civil compensation disputes between investors and financial institutions are disputes based on valid contracts, and most of them have been fulfilled. If traditional theories are adopted, most investors will lose the negligence of contracting. The basis of claim rights, and the obligation of suitability itself is not a contractual obligation, so that investors cannot use breach of contract as the basis of claim rights. Therefore, some investors have to choose tort liability as the basis of claim rights. This is also the limitation of the traditional negligence theory in contracting. Therefore, this article believes that liability for fault in contract should be extended to valid contracts. Professor Wang Zejian summarized the application of the principle of negligence in contracting into the following four categories: 1. The contract is not established; 2. The contract is invalid; 3. The failure to fulfill the obligation of notification at the time of the contract causes the other party to suffer property losses; 4. The failure at the time of the contract The obligation of protection causes damage to the health of the other party. The first two situations are consistent with the traditional negligence theory, while in the latter two situations, the establishment and effectiveness of the contract cannot be ruled out. For example, in the case of a pre-sale contract for a commercial house, the seller did not inform the buyer that the house purchased belongs to the pipeline layer, and the buyer later asked for compensation. In this case, the commercial housing pre-sale contract has been established and has become effective, but the buyer cannot exercise the right of cancellation in accordance with Article 54 of the Contract Law, and there is no invalid contract stipulated in Article 52 of the Contract Law. Under the circumstances, the buyer can only claim the right on the basis of the liability for negligence in contracting. As Professor Han Shiyuan pointed out: “In modern social life, the initial situation in Roman law where the contract cannot be invalidated objectively from the beginning (later regarded as a typical example of negligence in contracting) is very rare; , It is the negligence problem of contract validity; especially related to consumer protection, this type of negligence liability has been colorfully developed in foreign jurisprudence and doctrine."

In high-risk financial investments, for ordinary investors, the investment direction of financial products, the status of underlying assets, and risks are the decisive factors in deciding whether to conclude a contract. If financial institutions have information, insufficient performance of risk disclosure obligations, and existence of failures Fulfilling appropriate sales obligations should be regarded as violating the requirements of the principle of good faith, and the contract concluded by both parties at this time is not of course invalid or revocable. Therefore, it fully complies with the provisions of Article 42 of the Contract Law. The loss caused by the obligation.

3. The application of the principle of negligence in investor suitability cases

According to Article 88, paragraph 3 of the new "Securities Law", if a securities company violates its obligation of suitability and causes losses to investors, it shall bear corresponding compensation liabilities. The Jiumin Minutes pointed out that if the seller's institution fails to fulfill its due obligations and causes losses to financial consumers, it should compensate the actual losses suffered by the financial consumers. In judicial practice, there are still different opinions on whether the principle of offset by negligence can be applied when financial institutions have not fulfilled their due obligations, that is, when investors are also at fault for losses, whether the liability of financial institutions for compensation can be appropriately reduced. This article believes that the principle of negligence is still applicable in investor suitability cases.

(1) Analysis of the legitimacy of applying the principle of negligence in contracting negligence

Negligence offset, also known as mixed fault, means that both parties to the contract are at fault for the occurrence of damage. When determining the liability, the parties may respectively bear the damage caused by each party based on the specific circumstances. There is a view that: "The scope of application of the principle of negligence is limited to tort liability, and the nature of the civil liability of the seller’s institution for breach of the obligation of suitability is the liability of contract negligence. Although from the final judgment result, in the case of financial consumers at fault, appropriate It is not improper to reduce the seller’s liability for damages, but from the perspective of strict legal application logic, the principle of negligence should not be applied to the reduction or exemption of contractual fault liability.” This article believes that contracting fault liability should not be excluded, and in fact it is not. The application of the principle of offset by negligence has not been ruled out. In practice, liability for negligence in contracting is often not caused by unilateral fault, and the fault of the victim may also lead to damage. For example, the contract is cancelled and confirmed as invalid due to the victim’s misunderstanding, which is the fault of both parties. It is against the principle of fairness that the offender bears all the losses. In addition, the principle of negligence is not a unique rule of the law of tort liability, and the point of view that confines the liability for negligence in contracting to the scope of the law of tort is narrow. If the application of liability for negligence in contracting is excluded in the contract law, it will directly lead to the loss of the party's right to relief.

According to Yitong, Article 58 of my country’s "Contract Law" is to apply the provisions of negligence in the liability for negligence in contracting. Article 157 of the Civil Code has been revised to it, although exceptions otherwise provided by the law have been added, but in general Inherited the principle of offset by negligence. Although Article 58 of the Contract Law sets the applicable prerequisite for the principle of “Negligence or Revocation” for the principle of negligence, as mentioned above, there are a large number of liability for negligence in concluding a contract when the contract is valid. From the perspective of balancing the interests of the parties, the principle of negligence should be extended to the liability for negligence when the contract is valid. As Professor Wang Zejian said: "The victim, due to his own fault, who misunderstands the establishment or validity of the contract, shall not request compensation at all. This provision is too rigid and inflexible. Therefore, the liability for negligence in contracting, the victim and the negligent, The rule of offsetting negligence shall still apply."

(2) The failure of the financial institution to inform and explain the obligation constitutes a breach of the obligation of suitability

The Jiumin Minutes believes that the fulfillment of the obligation of suitability is the main content of "selling and conscientious", and it is also the premise and basis of "buyer's responsibility". As mentioned above, the obligation of notification and explanation is the concrete development of the obligation of suitability and the fundamental guarantee for protecting investors' right to know. Article 88, paragraph 3 of the new "Securities Law" stipulates that if a securities company fails to fulfill its obligation of suitability, it shall bear the corresponding compensation liability for the loss of investors. Although the above regulations do not clarify the way in which the securities companies shall assume the liability for compensation, it can be inferred from the use of the term "corresponding" in the provisions that the new "Securities Law" does not exclude the application of the principle of negligence between investors and financial institutions. The word “corresponding” can be interpreted as “taking responsibility according to the magnitude of the fault of both parties”. In this case, Bank A argued that although Mr. B did not sign the "Stock Index Futures Trading Risk Warning Letter," in fact, the fund involved did not engage in stock index futures trading, and Bank A was not at fault. The court held that financial institutions have risk warning obligations for the wealth management products they sell, and the "Asset Management Contract" involved in the case stipulated that the scope of fund investment includes stock index futures, which means that the disputed fund will engage in stock index futures trading. Moreover, from the perspective of the classification of financial transactions, stock index futures are financial derivative transactions, which inherently have greater investment risks. Therefore, regardless of whether the fund involved actually engages in financial transactions within the investment scope agreed in the contract, financial institutions cannot exempt the relevant Risk warning obligations. In this case, B did not sign the "Stock Index Futures Trading Risk Warning Letter", and Bank A did not fully perform the risk notification obligation, which constituted a violation of the appropriateness obligation. There was a certain fault for B’s investment loss and should be based on his fault. The size bears the corresponding compensation responsibility.

(3) Investors should bear their own risks in accordance with the principle of "buyer borne"

It is generally believed that the obligation of suitability is to prevent financial institutions from improperly inducing ordinary investors to engage in high-risk financial transactions for the purpose of making profits, and to provide adequate protection to investors with insufficient risk tolerance. However, in reality, there are indeed some investors with considerable investment experience and high-risk hobbies who are willing to risk losing their capital in pursuit of high returns. The results of their risk tests often do not reflect the true risk appetite and risk tolerance. Because of this, the financial regulatory authorities insist on the principle that financial institutions should perform appropriate obligations and must not actively promote high-risk financial products to low-risk investors, and allow financial institutions to fully perform their obligation to explain and inform investors. On the premise of insisting on its own choice, selling high-risk products to low-risk investors is an exception to the appropriateness obligation. For this reason, the "Jiu Min Minutes" also made special provisions on the exemption of the seller's organization in this case. For this part of investors, the court shall apply the "buyer's conceit" principle on the basis of comprehensive consideration of their education level, previous investment experience, personal income level and other factors. In this case, the court comprehensively considered the following factors and determined that the investor was at fault for the investment loss and should bear the main loss:

1. Past investment experience

Objectively speaking, investment experience cannot be completely equated with the degree of professionalization of investors, but it is also an important factor that affects investors' decision-making and judgment, and it is also an important basis for financial institutions to evaluate investors' risk tolerance. For example, in the "Individual Investor Risk Tolerance Assessment Questionnaire" template produced and issued by the Securities Industry Association of China, investors’ investment experience is divided into four levels: limited, general, rich, and very rich, and investors are required to fill in truthfully . In this case, before buying the fund product of this case, Yi bought the "Bank of China No. 8" fund. The investment scope of this fund has a high degree of overlap with the fund of this case. The risk levels of the two are similar, but Yi's investment is profitable. In addition, Yi bought this case because he was a shareholder of a company limited by shares before purchasing a financial product, and since 2015 he has engaged in higher-risk investment activities such as equity investment, and the investment amount is also higher. Based on the above situation, Yi is an experienced investor with certain financial investment knowledge. He should be aware of the risks he may bear in purchasing the fund in this case and have certain expectations of investment losses.

2. Commitment at own risk

The "Minutes of the Nine Peoples" stipulates the exemption of financial institutions under certain conditions, that is, "The seller institution can prove that based on the financial consumers' previous investment experience, education level and other facts, the violation of the appropriateness obligation did not affect the financial consumers If an independent decision is made, the people’s court shall support it in accordance with the law for the defense that financial consumers should bear the investment risk.” In this case, from the risk assessment of Yi, the "Individual Customer Risk Assessment Questionnaire" shows that Yi As a prudent investor, his risk tolerance level is lower than that of the fund product involved. “Stability is the primary consideration. It is generally hoped that there will be some value-added income on the basis of ensuring the safety of the principal...” but higher than the “protection of capital”. "Conservative investors whose primary goal is not to lose money and maintain the liquidity of assets". However, Yi stated in the "Individual Customer Risk Assessment Questionnaire" that he was fully aware of the product risks, and stated that the purchase of the fund involved was his own choice and that he would bear the risk caused by the investment result. The above plot shows that even though the result of B’s risk level test shows that it is robust, he still chooses fund products that exceed his risk tolerance and promises to be willing to bear the principal loss. According to the principle of "buyer conceit", he should Take investment risks. Since Bank A has not fulfilled its obligation of notification and explanation, has not fully fulfilled the corresponding obligations of "seller due diligence", and has faults, the investor's own losses can be appropriately reduced. The court comprehensively considers the degree of fault of both parties and judges B in accordance with the principle of offset The bank bears 60% of the loss and the bank bears 40% of the loss.