Safra Sarasin fined $50 mln by German Court

Swiss bank J. Safra Sarasin must pay German drug store entrepreneur Erwin Mueller around €45 million ($50.7 million) in compensation for incorrect investment advice, a court in the German city of Ulm has ruled.

The Brazilian-owned bank had put Mueller's money into a fund specialising in so-called cum-ex trades. The 84-year-old businessman had said the bank did not properly advise him about the risks involved. Meuller had demanded restitution from the bank for being poorly advised on high-risk funds. The bank, which had rejected the accusations, has a month to appeal the verdict. It noted the case dated back to when it was majority owned by another business.

Cum-ex trades focus on shares about to go ex-dividend and can lead to a double repayment of capital gains taxes that in fact were only paid once. The practice takes advantage of a legal loophole and is no longer admissible.

Investors lost millions when the German finance ministry halted the practice that experts calculated had cost the treasury up to 12 billion euros.

The court ruled the bank had not informed Mueller fully of commission rules and had assured him his investment was insured against losses although this was not the case.

Safra Sarasin recently pulled the plug on its business with wealthy Germans: the bank pulled out  of the German market earlier this year after failing to reach a sustainable profit. It managed roughly 1.5 billion Swiss francs in Germany, and employed 80 people.