Shabbat Parashat Shemot | 5770

P’ninat Mishpat: Culpability for Bad Financial Advice – part I

(based on Eit Ladun – Rav Nir Vargon - Halacha Psuka, vol. 33)

Of those who invested their money in the failed real estate company, Heftzibah, which collapsed a few years ago, some will receive their home and others will be reimbursed because they had a bank guarantee. The biggest losses will be the lot of those who invested without guarantees. Some people took this unwise move after consulting with financial advisors. Can financial advisors be sued for giving such bad advice? After all, the idea to invest such large sums of money without legal remedy for possible loss is an irresponsible act, as any beginner economist could tell you, even if it saves a little bit of money.

The Rama (Choshen Mishpat 129:2) rules: “Even if one did not make himself a guarantor explicitly, just that he told the lender that the borrower is safe to lend to, based on which he lent, and it was a lie, he has to pay him, for it is as if he became a guarantor for him.” In other words, since the loan was based on the advisor’s advice, damages that resulted from the loan are his responsibility, since he caused the loss. One could understand, based on the language and context of the Rama, that the obligation is based on the principles of a guarantor (arev). However, the Mahari Weil (Shut 80), which is the Rama’s source, is clear that the obligation is based on dina d’garmi (payment for semi-direct damages) like the case of advising someone to accept a coin for payment, when the coin is not legitimate. The advisor is in fact not an arev because he did not obligate himself to pay.

The Netivot Hamishpat illustrates that there is a practical difference between the possibility the obligation is one of garmi or of arev. According to several opinions, garmi is a rabbinic law and as such cannot be levied on the advisor’s inheritors. Another difference is that while an arev is obligated across the board, garmi does not apply, according to the opinion that it is a penalty payment, when the damage was caused unintentionally. Even according to the opinion that garmi is from the Torah, it does not apply when it occurred by oness (under extenuating circumstances) through speech, not action (based on Shach, CM 386:6).

The source to obligate an advisor through garmi is the gemara (Bava Kama 99b) regarding a shochet who shechted improperly. The gemara says that while an expert is exempt if he shechted for free, a novice is always obligated. The Shach (CM 129:8) says that the exemption is because of oness, but this does not help the novice because he was negligent for not having said that he did not know how to do it properly. A parallel source is in regard to one who said a certain invalid coin was valid. According to most opinions the distinctions found regarding the shochet apply to the coin appraiser. The machloket is whether he is obligated only when it was stipulated that he was being relied upon (Rif, Rambam, Shulchan Aruch (306:6), and Rama) or whether this reliance can be assumed based on the circumstances (Tosafot and others).

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