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Payments and incentives from third parties

Starting point

 | In a judgment passed in October 2012, the Swiss Federal Supreme Court defined its practice as regards remuneration from third parties in asset management. The judgment makes clear that the client is in principle also entitled to benefit from commissions and retrocessions that banks receive from providers for the distribution of investment funds and structured products.

 

Current status

 | As regards the area of independent asset management, the Swiss Federal Supreme Court decided in 2006 and 2011 that the client is in principle entitled to benefit from payments received by the asset manager from third parties. Clients may only waive retrocessions if they have been informed of the level of payments in full in advance.

 

Monitoring

 | The latest judgment will in all likelihood have a far-reaching effect on issues related to payments in connection with financial services. This applies in particular, but not only, to highly integrated financial services companies that focus on in-house products in the field of asset management. In terms of the obligations of asset managers to provide transparency on the payment, receipt and level of commissions, FINMA thinks too many questions remain unanswered. FINMA therefore believes that new legislation is required. In its position paper on distribution regulations, it suggests regulating retrocessions in a future Financial Services Act. If they want to maintain current retrocession practices, independent asset managers will have to consider whether they are prepared to give up the label of being "independent" in return for doing so.