Court Rules Bank Not Liable for Client's Investment Losses

A district court has dismissed a NIS 3 million lawsuit against Bank Leumi, filed by a client who claimed the bank should have sold his shares before they lost value. The client alleged that due to personal financial and mental distress from a divorce, the bank was aware of his condition but failed to prevent his significant losses. Judge Yaakov Spesser ruled the claim unfounded, stating Leumi was not obligated to act against the client's explicit wishes.

The client, who had managed his account at Leumi since 2014 and traded foreign securities, purchased $2.9 million worth of First Republic Bank stock in March 2025. The shares plummeted the following month. The client contended that Leumi only sold them in May, after they had lost nearly all their value, and that the bank had encouraged him to concentrate his investments in this single stock, deviating from his previous diversification strategy.

Leumi countered that the client provided contradictory accounts of the stock sale, that he himself prevented the sale, and that the bank was unaware of his medical condition. The bank argued the client was a sophisticated investor who acted independently and that the lawsuit was an attempt to offset his NIS 1 million debt to the bank.

Spesser found that the plaintiff decided to purchase the shares on his own and that Leumi had no reason to suspect he was unaware of the risks. The decision to avoid selling was also the client's, as he rejected the bank's offer to sell after a collateral shortfall arose. The judge emphasized that banks are not guardians of their clients and are not responsible for assessing whether a client's instructions will lead to profit or loss.

The court noted that while banks must be alert to unusual transactions that raise suspicion, the client's activity, including concentrating his investments in one stock, was not sufficiently abnormal to warrant the bank's suspicion, especially given his years of experience in the capital markets. The judge also stated that the client failed to prove he was incapacitated during the relevant period or that the bank was aware of his condition, citing recorded conversations where the client demonstrated knowledge of investments and gave clear instructions. The client was ordered to pay NIS 100,000 in legal costs.