- within Finance and Banking topic(s)
- in United States
- with readers working within the Banking & Credit industries
- within Government and Public Sector topic(s)
In a precedent setting Decision 4A_149/2025 of 12 January 2026, the Swiss Federal Supreme Court ruled that, unlike the situation with portfolio management or advisory relationships, a bank is not required as a matter of contract law to hand over retrocessions, including distribution fees, to clients in an execution-only relationship, unless they cause an actual or potential conflict of interest with the duty of loyalty to the client. This decision brings certainty and puts the controversy and contradictory rulings of cantonal courts to rest. Beyond legacy disputes, the immediate practical implication of the case will be limited. However, it should cause FINMA to rethink its practice under the Federal Act on Financial Services of 15 June 2018 (SR 950.1).
Under article 400 (1) of the Swiss Code of Obligations ("CO"), "a mandatee is obliged at the mandator's request, which may be made at any time, to give an account of his activities under the mandate and to return anything received for whatever reason as a result of such activities." In a leading case of 2007, the Federal Supreme Court held that this provision entails an obligation for portfolio managers to hand over to their clients retrocessions received from the custodian unless the client has validly waived this claim.1
This spanned a series of decisions holding, on the one hand, that this principle also applies to banks acting as portfolio managers that
receive distribution commissions from fund management companies and issuers of structured products2 as well as to financial institutions acting in an advisory capacity and, on the other hand, laying down the conditions under which clients may validly waive their right to receive retrocessions3 and the duration of the statute of limitation of restitution claims by clients.4
In parallel, as set forth in annex 1, various regulatory provisions governing these issues were passed into law: first, in the realm of occupational pensions and related schemes,5 then in financial services6 and, more recently in connection with insurance intermediation.7
However, until the decision of 12 January 2026, the Federal Supreme Court did not need to decide on the question whether article 400 (1) CO applies to execution-only relationships where the client decides on its own which financial instrument it intends to acquire without receiving individualised advice from the financial institution or otherwise relying on the financial institution to provide a personal recommendation. Cantonal courts had issued contradictory rulings with some courts extending the restitution duty to execution-only relationships, while others were more nuanced and, until then, the Federal Supreme Court was able to resolve the dispute without ruling on the issue.8 Therefore, many legal practitioners and scholars longed for a decision on this matter, hoping it would settle the controversy once and for all.
I . Facts of the Case
The case at hand concerned two accounts, a joint account and an individual account, one of which was closed in 2012 and the second in 2017, only the latter (the individual account) being relevant to the dispute, through which the client had invested in financial instruments (investment funds and structured products) without entering into a portfolio management agreement or an advisory relationship.9
Throughout the period ranging from 2010 to 2017, the bank received retrocessions (distribution fees and maintenance commissions, commission d'états, Bestandespflegekommissionen), in a total amount of CHF 31,477, which were the subject of the controversy that led to the Federal Supreme Court Decision.10 By contrast, the client had not been able in front of the lower court to allege in sufficient detail or prove that the bank had to choose among different platforms or brokers or received payments from exchanges or brokers for "order-flow" and, hence, was barred from challenging the finding in front of the Federal Supreme Court.11 Since 2011, the bank had changed its general terms of conditions to provide a waiver of the right to reclaim third-party benefits.
II. Summary of the Legal Considerations
1. Characterisation
a) Banking Relationships
In its ruling, the Federal Supreme Court, first, restated that banking relationships are generally made of several contractual relationships: a current-account relationship, a so called giro agreement for payment services and for investment services, a portfolio management agreement, or an investment advisory agreement or a mere execution-only custody agreement, which combined constitute so-called mixed agreements with aspects of a mandate governed by articles 394 ff. CO.12
Accordingly, the specific scope of the obligations of the bank depends on the characterisation of the specific relationship, although they generally flow from the same statutory duty of loyalty which is specific to mandates (article 398 (2) CO) or the yet broader duty to act in good faith that applies generally in private law (article 2 (1) of the Swiss Civil Code).13
b) Execution-only
In an execution-only relationship, the bank only assumes the duty to execute orders upon a specific instruction of the client. Such order will take the form of a separate contract, a commission-agency contract governed by article 425 ff. CO, which is a specific form of mandate. In such relationships, the bank does not assume a general duty to protect the interests of the client or to inform the client of the appropriateness or suitability of the instructions. This characterisation and conclusion also holds when the bank communicates on request of the client the general expectation of the financial institution or third parties on the evolution of financial instruments.14 Quite to the contrary, the client decides alone which investment it intends to make without relying on the mandatee to determine which one best meets their personal goals.15
c) Portfolio-Management Relationships
By contrast, the Federal Supreme Court restated that in a portfolio management agreement, the bank is entrusted with the duty to manage the assets of the client within the limitations set by the investment strategy and objectives set by the client.16 In such relationships, the bank assumes as a consequence of the duty of loyalty (article 398 (2) CO) extensive duties of information and accountability, including the duty to hand over any benefit received in performance of the mandate (article 400 (1) CO).
2. Duty to Hand-Over Benefits as a Rule to Prevent Conflicts of Interest
After drawing the line between execution only relations and portfolio management agreements, the Federal Supreme Court pointed out that, in line with its more recent precedents on the matter, the duty of accountability and the duty to hand over benefits expressed in article 400 (1) CO does not exist in a vacuum but aims at protecting the interests of the client and preventing conflicts of interest, by ensuring that benefits that cause conflicts of interest are handed over to the client.17
Footnotes
1. BGE 132 III 460.
2. BGE 138 III 755.
3. BGer 4A_355/2019, consid. 3.1. See already BGE 137 III 393, consid. 2.4 and 2.5.
4. BGE 143 III 348.
5. See article 48k of the Ordinance on Occupation Benefits for Old-Age, Widows and Orphans and Invalidity of 18 April 1984 ("BVV 2", SR 831.441).
6. See article 26 of the Federal Act on Financial Services of 15 June 2018 ("FinSA", SR 950.1).
7. See article 45b the Federal Act on the Supervision of Insurance Undertakings of 17 December 2004 ("ISA", SR 961.01).
8. See BGer 4A_574/2023 of 24 Mai 2024 consid. 8.3; 4A_601/2021 of 8 September 2022, consid. 7.2.
9. BGer 4A_149/2025 of 12 January 2026, consid. A.a and 3.5.2.
10. BGer 4A_149/2025 of 12 January 2026, consid. A.b and 3.5.2.
11. BGer 4A_149/2025 of 12 January 2026, consid. 3.6.3.
12. BGer 4A_149/2025 of 12 January 2026, consid. 3.1.
13. BGer 4A_149/2025 of 12 January 2026, consid. 3.2.
14. BGer 4A_149/2025 of 12 January 2026, consid. 3.2.1, referring to BGE 133 III 97, consid. 7.1.1; BGer 4A_54/2017 of 29 January 2018, consid. 5.1.2.
15. BGer 4A_149/2025 of 12 January 2026, consid. 3.2.1,
16. BGer 4A_149/2025 of 12 January 2026, consid. 3.2.2.
17.BGer 4A_149/2025 of 12 January 2026, consid. 3.2.2.
To read this article in full, please click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
[View Source]
