The Role of Investment Experience in the Suitability Obligation of Financial Institutions—A Research Based on Judicial Cases Involving Investment Experience
There are many challenging issues in determining the role of investment experience in the suitability obligation of financial institutions in judicial practices,yet there is scarce specialized research in academia on this matter.The suitability obligation is justified on two fronts,i.e.,to protect investors'reasonable reliance and to strengthen weak decision-making ability.Based on comparative law experience and knowledge of economics,investment experience plays a decisive role in assessing whether an investor has sound decision-making ability,thereby impacting whether the investor should be protected under the suitability doctrine.Investment experience is correlated with the degree of investor negligence and causality,influencing the extent of liability financial institutions should bear for violating the suitability obligation.
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