Novating Mis-Sold Swaps: The Poverty of Narrowly Contractual Analysis

Mon, 02 Feb 2015

An article by Paul Marshall, published in the January issue of Butterworths Journal of International Banking and Financial Law, can be downloaded below. 

In Part 2 (click here for part 1), Paul Marshall considers the regulatory obligations and wider common law duties of firms novating to a company a derivative product mis-sold to its director as an individual

Key Points
  • Continuing the argument that courts tend to adopt too narrow an approach to the misselling of interest rate swaps, it is suggested that the decision in Bailey and MTR Bailey Trading Ltd v Barclays Bank plc [2014] EWHC 2882 QB is arguably wrong in law.
  • It is explained that the bank’s own interests in benefits represented by the mis-sold swap, following the collapse in interest rates, may have displaced performance of its regulatory obligation under COBS 10 to undertake an assessment of the “appropriateness” of the product when novated to the company.
  • The seemingly default recourse to a restrictive contractual analysis is apt to disregard duties, wider than contractual obligations, including not to induce breach of lawful obligations.

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