The Hong Kong court has sided with HSBC Bank ruling that the bank had limited duties and obligations in execution-only services involving structured products in relation to contractual agreements between consenting adults.
The ruling, handed down by Justice Anselmo Reyes, is expected to serve as a guide for other cases involving accumulator products being heard in the city's courts.
Daughter of the former chairman of the Hong Kong stock exchange, Selina Kwok Wai-hing, had sued HSBC Private Bank (Suisse) for HK$10m (US$1.2m) over losses incurred from an accumulator product.
Claiming she was unaware of or educated on any risk disclosure statement which detailed that losses could be substantial, she said that she thought the products were "super time deposits" and described herself as "merely an unsophisticated housewife."
Justice Reyes found that Kwok - as an adult with an excellent education, including two years at a London university - could not escape responsibility.
Aside from its execution-only role, Reyes ruled that the bank was not responsible for additional duties to monitor Kwok's account and warn of over-extension or over-exposure.
Reyes found that clients were at fault if they were too unsophisticated or busy to look at papers sent to them.
Kwok had entered into some 350 forward accumulator contracts as well as equity-linked notes with the bank between January 2003 and December 2007. Her net worth with the bank grew substantially from an initial HK$93.1m ($12m) before the November 2007 market plunge left her exposure at HK$698.2m ($90m).
The products had the bank's highest risk rating.
Head of litigation and dispute resolution at Clifford Chance in Asia, Donna Wacker, said banks should ensure that accounting opening documents provide adequate disclosures regarding risks.
As stated in a briefing note by Justice Reyes, the judgement also highlighted the need to record and retain contemporaneous evidence such as telephone recordings of trading strategies and investment decisions agreed by customers.