A lucrative business model for Swiss and Liechtenstein banks and asset managers
Many Swiss and Liechtenstein banks and asset managers unlawfully receive billions in retrocessions. These monetary benefits are due to the investors, who are often unaware of the claims.
Retrocessions are refunds from a fee charged directly to the end client. Stock maintenance commissions are an indirect fee from the management commission that is charged periodically to the fund assets and reduces asset's returns.
Since the banks and asset managers deliberately exploit the unawareness of their clients with regard to the distinction between retrocessions and stock maintenance commissions, we reclaim all financial benefits (particularly provisions, retrocessions, stock maintenance commissions, kickbacks, finder’s fees, distribution remunerations etc) for our clients. For the sake of simplicity, the term "retrocessions" is used below.
Retrocessions in Switzerland
Based on figures from Swiss Banking, experts estimate that in 2012 alone around CHF 4.2 billion or 12.4% of the value generated in the banking sector was made through the retrocession business model (source: Finalix AG, Zug). Every day, large sums are lapsing in favour of the banks and asset managers due to the ongoing limitation periods (ten years retroactively in Switzerland and 30 years in Liechtenstein).
Despite several Swiss Federal Court rulings, whereby it was already decided with the ruling BGE 4C_432 from 2006 that retrocessions are in principle due to the investors, only a few investors have so far claimed back the retrocessions. This reluctance plays directly into the hands of the financial service companies. In the meantime, many investors are threatened by the expiry of their claim, which - depending on the size of the fund under management - may easily reach five or six figure sums.
Retrocessions in Liechtenstein
While the Federal Supreme Court in Switzerland ruled on the issue of retrocessions already in 2006, the topic has emerged in Liechtenstein in the last few years only. In the meantime, the Liechtenstein Supreme Court ("OGH") has ruled that retrocessions, regardless of the type of business relationship (asset management, advisory mandate, execution-only mandate), must be disclosed to investors and generally are due to the investors.
The ruling of the EFTA Court of 15 July 2021 made a significant contribution to the jurisdiction in Liechtenstein. The EFTA Court was asked to interpret Art. 26 of Directive 2006/73/EC (MiFID Implementing Directive) in order to clarify how an investment firm must inform its clients about inducements (retrocessions, stock maintenance commissions, kickbacks, finder's fees, distribution fees, etc.) that it receives from or pays to third parties. The EFTA Court's decision is guided by the fundamental principle of investor protection and states that an investment firm has the obligation to disclose in a comprehensive, accurate and comprehensible manner, prior to the provision of the investment or ancillary service in question, whether and, if so, when a fee, commission or non-monetary benefit is granted.
On 07.04.2022, the Parliament of the Principality of Liechtenstein decided to shorten the statutory limitation period for surrender claims against financial intermediaries in the Principality of Liechtenstein to ten years. At the same time, the transitional period after this application comes into force has been reduced to only one year. I.e. investors can still assert potential claims for the last 30 years until the cut-off date of 31.05.2023, after which investors will lose virtually all claims to which they would be entitled for the last 30 years according to the Princely Supreme Court.
Private investors as well as companies (institutions, SA), foundations, trusts or heirs can enforce a claim, although investors should hurry due to the amendment of the law.
Liti-Link also offers investors in Liechtenstein the successful model that has been tried and tested hundreds of times in Switzerland: Risk-free recovery based purely on profit-sharing. The broad experience from Switzerland can be transferred to the small neighbour. Liti-Link has already successfully reclaimed retrocessions from Liechtenstein asset managers many times in the past.