The Osaka District Court, on 4th March 2009, issued an interesting decision regarding the adaption of suitability rule in unrecommended securities transaction. The transaction was in terms of the NTT stock and a plaintiff customer had claimed that he was recommended to concentrate his investment to the stock by a securities broker, “Shinko Securities”.
The court approved that the plaintiff was recommended to purchase the NTT shares; but the concentration of the NTT stock was not recommended by the defendant, but asked by the plaintiff, the court said.
Initially, the court approved the concentration of a certain stock was too danger for the plaintiff to be not suitable in his investment intention, knowledge, experience and financial status; and the court said that the defendant owed a duty to investigate a suitability of the plaintiff concerning the dangerous transaction; the court also pointed out that , as long as the defendant knew or was possible to know the status of the plaintiff, the defendant should advice to stop his decision; the court indicated a good faith on civil code (art. 1(2)) as a basis of the duty.
The court, on the other hand, asserted that the negligence of the duty should be deemed as a recommendation of the trading by omission; therefore it also should be against suitably rule by omission.
