New Swiss Federal Tribunal Judgment regarding Retrocessions
Today, the Swiss Federal Tribunal (SFT), Switzerland’s highest court, published a new judgment that deals with the issue of retrocessions (judgment 4A_355/2019 dated 13 May 2020).
A lot has been published in the past several years about the topic of retrocessions, and there is no need to repeat herein any of the general features of the prominent and well known retrocession topic. However, the above-mentioned new SFT judgment is interesting because it is an example of how the SFT assesses the question of whether or not the client has been properly informed about possible retrocessions.
In the matter at issue, the relevant Swiss external asset manager (EAM) had entered into an asset management agreement with his clients, a retired French couple, in which the clients waived their statutory right to obtain any retrocessions paid to the EAM. As is today well established by SFT precedents, and has in the meantime also become law in Art. 26(1)(a) in connection with (2) of the Swiss Federal Act on Financial Services, such waiver is subject to a proper prior information of the client(s) about the type and scope of the retrocessions.
The relevant retrocession disclosure contained in the EAM’s form(s) is described as follows in the new SFT judgment 4A_355/2019 (see para. A.b.):
“L’art. 4 de la notice d’information prévoit que la société de gestion reçoit (rétrocessions) de la part des tiers (banques dépositaires) un ‘certain pourcentage des revenus facturés au client (i.e les commissions facturées par la banque au client) qui varie selon la catégorie de revenus (commission d’administration, courtage suisse, etc.)’; il y est précisé que ce pourcentage se situe dans une ‘fourchette allant de 0% et 62% du montant facturé’ par la banque. Il est également prévu, toujours à l’art. 4 de la notice, que la ‘rémunération sur la masse détenue en fonds de placement, produits structurés, autres produits bancaires ou sur les apports effectués par le client se situe dans une fourchette allant de 0% à 1% du volume investi’ […]. Il s’agit, autrement dit, de rétrocessions perçues par la société de gestion pour les produits désignés (fonds de placements, produits structurés, etc.) qui se situent entre 0% et 1%. En résumé, la société de gestion (gérant externe) perçoit (1) des honoraires (pour sa gestion), (2) des rétrocessions (notamment) sur commissions d’administration ou courtage (entre 0% et 62% des montants prélevés par la banque) et (3) des rétrocessions (notamment) sur fonds de placement et produits structurés (entre 0% et 1% de ces fonds et/ou produits).”
In contrast to the lower (cantonal) court, the SFT considered that on the basis of the above-mentioned information the relevant clients had not been properly informed about the possible retrocessions (see considerations 3.2 – 3.4 of judgment 4A_355/2019). In a nutshell, and pursuant to my understanding, the SFT principally criticized and considered being insufficient the circumstance that in the above-described client information the total amount of possible retrocessions depends on the type and amount of investments made on behalf of the clients, i.e., whether and to what extent the clients’ assets are invested in mutual funds, structured products, etc. Given that based on the relevant asset management agreement, it is the EAM that decides about the investments to be made on the clients’ behalf, subject and pursuant to the investment objectives and the investment policy agreed upon with the clients, the amount of future retrocessions ultimately depends on the EAM’s investment decisions (see, in particular, consideration 3.2 in fine):
“On peut suivre les recourants [i.e., the French couple] lorsque […] ils soutiennent que les juges cantonaux sont parvenus à un résultat choquant (donc arbitraire) en croyant discerner, à l’art. 4 de la notice d’information, une référence à la masse sous gestion. Cette clause ne prévoit nullement que les rétrocessions correspondraient au pourcentage indiqué (entre 0% et 1%) de la fortune du client ou de sa masse sous gestion […]. La clause permet seulement de calculer les rétrocessions liées aux fonds de placement et aux produits structurés (résultant d’investissements), mais ne fournit pas la moindre indication susceptible de renseigner les mandants, en l’absence de tout investissement (au début de la relation contractuelle), sur le montant total des rétrocessions susceptibles d’être perçues en fonction d’un pourcentage déterminé de leur masse sous gestion. Leur critique principale se révèle dès lors fondée.”
In my opinion, the SFT has rightly qualified the information in question as being insufficient. It is necessary that clients who are asked to waive their statutory right to obtain retrocessions do indeed understand what exactly they are giving up. In that sense this new SFT judgment briefly discussed herein serves as a reminder that banks and asset managers have to carefully draft their waiver forms related to retrocessions, to ensure that such waivers meet the conditions defined and set by the SFT.
Philipp H. Haberbeck, Zurich, 25 June 2020 (www.haberbeck.ch)
The information contained in this article is for general informational purposes only and is not intended to constitute legal advice. Readers of this article should not take any actions or decisions without seeking specific legal advice. Any mandate is subject to the full execution of an engagement letter.
Rechtsgebiete: Bank- und Finanzmarktrecht