Liti-Link - recovery of retrocessions - Liti-Link AG
Unlawfully withheld commissions

Retrocessions are commissions, third-party payments, kickbacks, royalties and indirect fees that are invisible to investors and are systematically and unlawfully withheld by Swiss banks and asset managers.

Many Swiss and Liechtenstein banks and asset managers illegally collect billions in retrocessions. Investors are generally entitled to these monetary benefits by law, but they usually do not know to what extent the financial institutions are withholding them from them.

Receiving retrocessions is a lucrative business model for Swiss and Liechtenstein banks and asset managers because the hidden commissions usually end up, unnoticed by the clients, at the finance institutions’ accounts, even though the investors are entitled to them.

There are many different types of monetary benefits:

• Retrocessions (refunds from a fee charged directly to the end customer)
• Portfolio maintenance commissions (indirect fees from the management commission, which is charged to the fund assets on a recurring basis and proportionally reduces the return to which the investor is entitled from the fund assets)
• Kick backs
• Finder fees
• Commissions
• Sales compensation
• Third-party compensation
• Etc.

For the sake of simplicity, the term “retrocessions” will be used below.

No matter what you call them, investors are entitled to the monetary benefits mentioned above. There are numerous supreme court rulings that define this precisely and yet Swiss banks and asset managers still retain them. They are playing for time and relying on the statute of limitations of ten years.

Retrocessions can be reclaimed for financial investments for private accounts, numbered accounts, company accounts, foundation and trust accounts, regardless of whether it is an asset management mandate, an advisory mandate or an execution-only mandate (pure account/custody relationship). Retrocessions can also be reclaimed for inherited accounts.

Unfortunately, Swiss banks and asset managers do not have to proactively pay out the retrocessions that were wrongly withheld; instead, customers have to seek the money that has been withheld from them themselves. This recovery process is complex and is characterized by costs and failure. With “retroback”, Liti-Link therefore supports customers from all over the world in reclaiming retrocessions that were unlawfully withheld and offers a fair profit-sharing model.


Retrocessions in Switzerland

Based on figures from Swiss Banking, experts estimate that around 4.2 billion francs or 12.4% of the value added in the banking sector was generated by the retrocession business model in 2012 alone (source: Finalix AG, Zug). Due to the ongoing statute of limitations (ten years retroactively), large amounts of money expire every day in favor of banks and asset managers.

Despite several Swiss Federal Court rulings, with BGE 4C_432 from 2006 ruling that investors are generally entitled to retrocessions, only a few investors have so far claimed back the retrocessions to which they are entitled. All of this plays into the hands of the affected Swiss banks and asset managers: they are playing for time. Many investors are now threatened with the statute of limitations on their claims, which can easily reach five or six-figure sums depending on the assets invested/managed.


Retrocessions in Liechtenstein

While the Federal Court in Switzerland dealt with the issue of retrocessions as early as 2006, the issue in Liechtenstein has only come up in recent years. The Supreme Court (“OGH”) in Liechtenstein has now decided in three key judgments that retrocessions must be disclosed to investors and are generally due to them, regardless of the type of business relationship (asset management, advisory mandate, pure account/custody relationship).

The ruling of the EFTA Court of July 15, 2021 made a significant contribution to the jurisprudence in Liechtenstein. Questions regarding the interpretation of Article 26 of Directive 2006/73/EC (MiFID Implementing Directive) were submitted to the EFTA Court in order to clarify how an investment firm provides its customers with benefits (retrocessions, portfolio maintenance commissions, kickbacks, finder fees, sales compensation, etc .) that it receives from third parties or pays to third parties. The decision of the EFTA Court is based on the basic idea of investor protection. It states that an investment firm has the obligation to clearly communicate in a comprehensive, accurate and understandable manner before providing the investment or ancillary service in question whether and, if so, when a fee is charged, a commission or a non-monetary benefit is granted.

On April 7, 2022, the state parliament of the Principality of Liechtenstein decided to shorten the statutory limitation period for claims for surrender against financial intermediaries in the Principality of Liechtenstein to ten years. At the same time, the transition period after this application came into force was reduced to just one year. This means that investors could only assert potential claims for the last 30 years up to the deadline of May 31, 2023. Investors have now lost practically all of the claims that they would have been entitled to for the last 30 years according to the Supreme Court.

However, the topic is far from over: On the one hand, the future will show whether the Liechtenstein legislation with the introduction of Section 1489a Paragraph 2 ABGB is in conformity with the constitution and European law. On the other hand, the bodies of associations (foundation boards and trustees of foundations) can still be held responsible. The board of trustees of a Liechtenstein foundation is responsible for the success and maintenance of the foundation's share capital. In addition, the board of trustees is liable for failure to conduct business carefully, for example if it does not assert the claims of a foundation (source: LJZ 04/22, pp. 273 - 279).

Accordingly, if a board of trustees has not taken care of the reclaim of the retrocessions in a timely manner (before June 1st, 2023) and the foundation's claims to the payment of the funds have become statute-barred as a result, the board of trustees itself is liable for ten years from June 1st, 2023 for retrocessions that a bank or an asset manager has received in the last 30 years.

Even in such cases, Liti-Link has already supported damaged beneficiaries (beneficial owners) in asserting retrocessions against the board of trustees. We would be happy to support you too.

I was unaware that it was possible for me to recover retrocessions. Liti-Link has not only stopped the statutory limitation but also successfully asserted my right to the claims without delay.
Client Liti-Link