Mis selling of financial products is a major area of contention within Banking & Finance Disputes, arising when banks or financial institutions recommend or sell investment, insurance or structured products that do not match a client’s needs, risk appetite or financial sophistication. In the UAE, these disputes frequently involve complex investment notes, FX or interest rate derivatives, insurance linked savings plans, structured deposits and high yield products offered to retail clients, SMEs, corporates and high net worth individuals. Mis selling allegations often centre on inadequate disclosure of risks, misleading statements, unsuitable recommendations or failure to comply with regulatory duties of care. As investment offerings become increasingly sophisticated, disputes over suitability, risk transparency and product governance continue to escalate, making this a critical area for both investors and financial institutions.
Mis selling occurs when a financial product is marketed, advised or sold in a manner inconsistent with regulatory standards or the customer’s profile. This can include incomplete or inaccurate information about investment risks, exaggeration of potential returns, downplaying of fees and penalties, or failing to ensure that the product is genuinely suitable for the client. UAE regulators set clear expectations for suitability assessments, disclosure requirements and the classification of clients as retail or professional, and these rules form the foundation for evaluating mis selling claims.
Disputes often arise across a wide range of financial instruments, especially those whose complexity was not properly explained to investors.
These products bundle derivatives with bonds or deposits and can involve leverage, knock in and knock out mechanisms, or market linked payoffs. Customers may allege that their bank failed to explain downside exposure, volatility sensitivity or break costs.
Long term insurance investment plans have generated significant litigation, particularly where high fees, surrender penalties or unrealistic return projections were not clearly disclosed. Clients often claim they were not told that early withdrawal would result in substantial capital loss.
Corporates may argue that hedging products increased rather than reduced risk, or that products were sold as “protection” without explaining mark to market exposure, margin calls or potential termination losses.
Claims often arise where financial institutions promoted hedge funds, private equity, crypto funds or other alternatives as safe or capital protected, contrary to their actual risk profile.
The UAE regulatory environment distinguishes between retail, professional and eligible counterparty clients, each owed different levels of protection. Mis selling disputes hinge on whether the institution performed proper suitability assessments, provided clear risk disclosures and adhered to the standards required for the client’s classification. Anti fraud, consumer protection and financial services regulations all play a role in evaluating liability.
Several recurring themes shape how disputes unfold.
Investors may claim that fee structures, penalties, leverage, liquidity constraints or risk factors were not properly explained. Courts review written disclosures, product brochures, signed documents and correspondence to determine what information was actually provided.
Suitability is often the centre of mis selling cases. Banks must demonstrate that the product matched the client’s risk tolerance, investment horizon, financial position and experience. Poorly documented risk assessments or inadequate KYC processes can undermine a bank’s defence.
Some disputes allege that promotional materials or relationship managers depicted products as guaranteed, low risk or high yield, creating unrealistic expectations. Courts analyse whether statements were misleading, exaggerated or inconsistent with formal disclosures.
Even where mis selling is proven, investors must show that the misrepresentation caused their loss and that the loss was not simply due to market forces. This often requires detailed expert evidence, especially for structured products or derivatives.
Banks rely heavily on documented risk disclosures, client classification forms, investment profiles and signed acknowledgements to show that customers were properly informed. They may also argue that the investor was sophisticated, understood the risks or made independent decisions. Entire agreement clauses, disclaimers and execution only frameworks can further limit liability.
Investors pursuing claims must gather complete product documentation, assess whether disclosures match oral representations, and obtain expert analysis of risk features. Many cases are resolved through settlement, restructuring or repayment negotiations, particularly where ongoing banking relationships are important.
Mis selling of financial products remains a significant source of Banking and Finance Disputes in the UAE, driven by the growing complexity of investment offerings and increasing investor awareness of regulatory protections. Successful resolution requires detailed analysis of suitability assessments, disclosure practices and the client’s understanding of risk. Both financial institutions and investors benefit from clearer communication, robust documentation and disciplined product governance to reduce the likelihood and impact of mis selling disputes.
