Switzerland
The Swiss Federal Supreme Court has ruled that financial institutions are not obliged to pass on third-party benefits received in 'execution-only' relationships with clients.
The court distinguished between discretionary investment management relationships, where institutions make independent investment decisions, and execution-only relationships, where clients make their own investment choices. In discretionary relationships, institutions must pass on third-party benefits unless a valid waiver exists. In execution-only relationships, this obligation does not apply.
The ruling emphasizes that the duty to return third-party benefits depends on the potential for conflicts of interest. In execution-only relationships, where clients control investment decisions, the risk of such conflicts is deemed minimal.
This decision provides clarity for financial institutions and clients regarding the handling of third-party benefits in different types of investment relationships.
