LALIVE & AFBS Roundtable on retrocessions • Alexander Troller and Nicolas Ollivier Where do we stand • Sandrine Giroud What’s next • Simone Nadlhofer Future regulations in Switzerland and Europe LALIVE & AFBS Roundtable Retrocessions: Where Do We Stand ? Alexander Troller & Nicolas Ollivier 11 December 2012 – Geneva Plan I. Step 1: Decision of 22 March 2006 (ATF 132 III 460 ) A. Facts & lessons B. Swiss Fund Association’s Communication (5 December 2006) C. FINMA Guidelines on Asset Management (Circular 2009/1) D. Rules of Professional Organisations E. Swiss Bankers Association’s Portfolio Management Guidelines II. Step 2: Decision of 13 January 2011 (6B_223/2010) III. Step 3: Decision of 29 August 2011 (ATF 137 III 393) IV. Step 4: Decision of 30 October 2012 (4A_127/2012) A. Facts & lessons B. FINMA Newsletter 41 (2012) of 26 November 2012 C. Swiss Bankers Association’s reaction V. Conclusion 2 I.A. Step 1: Facts & lessons(1/2)  ATF 132 III 460 : Claim against an independent asset manager who had received finder’s fees and other retrocessions. The asset management contract did not set out any waiver by the client  Principle: restitution to the client of retrocessions closely connected to the performance of the relevant discretionary or advisory asset management agreement  Possibility of Waiver if ► Express ► “Client fully and truly informed” (“client informé de manière complète et conforme à la vérité”)  Lessons ► Independent asset managers ► Avoidance of conflicts of interests 3 I. A. Step 1: Facts & lessons (2/2) Bombshell for Swiss asset management industry or not  Amendment to asset management agreements 4 I. B. SFA’s Communication (5 December 2006)  Distributors of financial products not affected by the Swiss Supreme Court decision  Distributors are entitled to keep retrocessions if (i) services are provided, and (ii) not paid for otherwise (trailer fee) Trailer fees are not considered closely connected to the performance of the relevant discretionary or advisory asset management agreement  Transparency toward clients is deemed to be adequately guaranteed by disclosure in prospectus of percentages of fees and of the fact that retrocessions may be paid to distributors 5 I. C. FINMA Guidelines on Asset Management (Circular 2009/1)  Asset management agreement must indicate who is entitled to the retrocessions (asset manager or client)  Disclosure of any conflict of interest possibly resulting from retrocessions  Disclosure of how to determine retrocessions ► Calculation parameters; or ► Proportion of amounts involved (differentiation / various product classes) 6 I. D. Rules of Professional Organisations  Professional organisations ► Swiss Association of Independent Financial Advisors (SAIF) ► Swiss Association of Asset Managers (SAAM) ► Swiss Self-Regulating Body of the SAAM (SRO of SAAM)  Implementation of FINMA Circular 2009/1  Compliance check of asset management agreements with FINMA Circular 2009/1 7 I. E. SBA’s Portfolio Management Guidelines (1/2)  Guidelines amended in 2010 following FINMA Circular 2009/1  SBA’s guidelines match SFA’s position  Asset management agreement must specify who is entitled to retrocessions  Retrocessions, closely connected to the performance of the relevant asset management agreement, must be passed on to the client unless otherwise foreseen by (written) agreement  Retrocessions received at the opportunity of executing the asset management agreement need not be passed on to client  e.g. retrocessions for services provided – trailer fees 8 I. E. SBA’s Portfolio Management Guidelines (2/2)  Banks must inform clients of ► Conflicts of interest possibly resulting from retrocessions; ► Calculation parameters or of the proportion of amounts involved 9