CL-2020-000117 - [2025] EWHC 1620 (Comm)

Since this is a legitimate investment I do not intend to take up time in describing it in any detail. Falcon invested a total of €9.6m in it on 23 April 2015. It traded on the SIX Swiss exchange until it matured on 10 April 2018. The product was in effect a bet on whether one of 4 states would fail to repay its sovereign debt without default or restructuring. No payment was recoverable by the investor unless there was a default by one of the sovereign states concerned. Falcon disposed of its investments in this security on 8 December 2015 for €1.9m. Given the nature of the product, it is probable that this loss reflects market sentiment because none of the relevant events happened or can be shown to be at any real risk of happening during that period or at all. Inevitably therefore the value of the secondary market of such a product was likely to reduce significantly. There is no evidence that selling the product at the time it was sold was not an option that was reasonably available to an investment manager or that the loss resulting was not simply the result of a disposal of a product that was unlikely to benefit the investor.

What remains to be considered is the payment of commission on the acquisition of this product. By an agreement between Leonteq Securities (Europe) GmbH (“Leonteq”) and SVC (“Leonteq Agreement”), it was agreed that SVC would act as broker for the purpose of introducing third parties to Leonteq willing to purchase products issued by it or its associates including Notenstein and that a fee would be payable to SVC in the event that the third party so introduced entered into a “relevant Contract” – see clause 1 of the Leonteq Agreement. The agreement was an agreement to agree because it was agreed between the parties that the fee payable “… shall be calculated as a percentage of Transaction value such percentage to be agreed on an Introduction by Introduction basis, as noted in writing by way of memorandum which shall specifically refer to this agreement and to the Introduction in question…”

On 6 May 2015 SVC invoiced Leonteq for “Sales Commission for Leonteq Warrants” in the sum of US$ 3,700,017.00. Given the proximity of the date of the invoice to the date when the product I am now considering was acquired by Falcon, I am satisfied that it is probable that the sum claimed was claimed by reference to that transaction. Leonteq paid that sum the same day – see the SVC bank statement referred to at footnote 232 to Mr Holt’s first report. The commission is 35% of the amount received by Leonteq from Falcon for the product I am now considering. On 9 May 2015, Mr Ökten invoiced SVC for “Consulting fee and commission on advised transaction” in the sum of US$675,000 and on 11 May 2015, US$675,000 was made from SVC’s Bank account to Mr Ökten, which payment was funded directly from the payment by Leonteq to SVC. It represents about 20% of the sum received by SVC.

I accept the claimant’s submission that this is unusually large for the reasons and by reference to the evidence referred to in the claimant’s supplemental Note at Section B3. There is no basis for thinking that any commission in excess of 1% would be reasonable or thought to be reasonable by an experienced investment manager such as Mr Ökten or for that matter someone with the knowledge and experience of Mr Serwin. It is also submitted that it is difficult to see how a product of this sort made any sense for a pension fund to invest in. I am not prepared to conclude that was so simply on the basis of the nature of the product viewed in isolation. Whilst it was undoubtedly a high risk product, it is one that in principle may be appropriate to acquire as part of a balanced portfolio given the high return. However, whether or not that was so would require expert investment expert evidence analysing the investment in the context of what ostensibly at least the relevant Falcon sub fund was meant to offer to investors. There is no such evidence available to me.